Q: I'm trying to find out why I pay taxes on money that I never see. And NO ONE can give me that answer can you?
I was in a semi accident in2013, and have been on workmans comp and disability since then. My problem is every year I get a 1099 from social security for 15,000$ stating that is what I WOULD HAVE gotten paid. But when I go into the office and ask what it is,they say that workmans comp sends them this information and that they have to send the 1099 it's the law. when I talk to workmans comp they have no clue. In the meantime we have been paying taxes on money that I NEVER GET. Is this legal?
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A:
I understand your frustration with receiving a 1099 form for money that you don't actually receive. The situation you're describing is complex and involves the interaction between workers' compensation and Social Security Disability Insurance (SSDI). Here's what I can tell you:
1. When you receive workers' compensation benefits, it can offset (reduce) your SSDI benefits. The combined amount of SSDI and workers' comp benefits cannot exceed 80% of your average current earnings before you became disabled.
2. The 1099 form from Social Security likely represents the amount of SSDI benefits you would have received if your workers' comp benefits did not offset them. This is to ensure that the IRS is aware of the total amount of benefits you're entitled to, even if you don't receive the full amount due to the offset.
3. Regarding the legality of paying taxes on money you don't receive, SSDI benefits are taxable if your combined income exceeds certain thresholds. However, workers' compensation benefits are generally not taxable at the federal level.
It's essential to consult with a tax professional or attorney specializing in disability and workers' compensation laws to better understand your specific situation and ensure that you're not being taxed inappropriately. They can review your case and provide guidance on how to proceed, potentially including contacting the IRS or Social Security Administration to clarify the situation and make any necessary adjustments.
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