This article is intended for our US audience and is provided by Susan Ranford from Krasno, Krasno & Onwudinjo.
Workers’ compensation refers to the payment an employee gets when they get injured or sick on the job. This holds businesses accountable for having a high standard work environment and protects employees in case they get injured on the job.
Most sources online talk about how you can get worker’s compensation but there’s not much discussion about what you should be doing after you get it. So in this article, we’ll talk about the next steps you should take now that you have received your worker’s compensation.
Understand the Tax Implications
Aside from getting a lawyer for your rights, you should also be getting a lawyer for your tax. Most times, one person can do both jobs of helping you get your compensation and calculate how much tax is needed to be paid.
So how much of your worker’s compensation is taxable? It depends. You may or may not need to pay at all. In most cases, you do not need to under state or federal levels. This is because the worker’s compensation act is exempt from tax.
However, if you are receiving Social Security Disability Insurance or Supplemental Security Income, part of that compensation will be taxed. Part of the Social Security payments you are receiving will also be reduced. More often than not, this amount is small enough that it may also be exempt from taxation.
In the rare case that your income is taxable, it would greatly helpful to hire a tax lawyer. They ensure you pay the best possible rates by coming up with a payment structure.
Don’t Take Your Employer to Court
Suing is the last resort for getting your compensation and for most people, the cost of doing so doesn’t really justify the amount you get. So unless an injury is very grave and it’s going to leave you disabled for the rest of your life, then there’s no need to sue anyone. Also, once you get your worker’s compensation benefit, you are not entitled to sue them anymore since you have agreed to receive compensation instead.
Decide Between Lump Sum or Structured Settlement
Lump sum is great if you want to use that money for long-term investments NOW. Meanwhile, structured payments are good if you know you will be needing that money to pay for medical expenses in the future.
How you want to be compensated entirely depends on your situation. There are benefits to each one and it’s best to ask your attorney what the best payment option is for you.
Create a Plan
Once you’ve decided how you want to receive your worker’s compensation, it’s time to come up with a plan. You don’t want to be blowing all that money. It’s not free. Its main purpose is to supplement the income that you lost due to the injury that you had from work.
You want to treat it like any hard-earned money and spend it wisely on things that are sustainable for you. You still need to stick to a budget and avoid sudden lifestyle changes.
Remember, you are not just looking after your wealth but also your health. If anything happens to you and your condition worsens, only you will get affected. Money can only do so much.
There are great resources on the internet that teach you how to budget and invest your money wisely. If you have no knowledge about investing, you can hire a trusted financial advisor who can teach you how to invest that money wisely.
So many people fall into the trap of spending all their money after they get their worker’s compensation. And then it’s back to zero, only now, you have an injury or a condition that limits your earning potential.
You don’t want to make that mistake. I hope this guide helps you move forward to a more financially sound future.
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