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Railroad Worker Must Pay Taxes on Workers’ Comp Claim


If you have been injured on the job, you are probably in a world of hurt in more ways than one. For starters, you are injured. You may be in pain as a result. You cannot work because of your injury. When you go back to work, you may still not be able to work like you could before the injury. Generally, many people would consider filing a worker’s compensation claim somewhere during this time period. If unable to reach a settlement, they might then consider filing a lawsuit.

Once a lawsuit is filed, if you win you will receive some award of damages. These damages are usually not taxable. That is, of course, unless you are a railroad worker. In those cases, having to pay taxes on the result of their workers’ compensation case is almost like adding insult to injury.

That being said, the question of whether workers’ compensation benefits for railroad workers are taxable is a complicated question that is by no means settled nationwide. Railroad workers have their own special set of laws that govern their working conditions, their retirement, and their healthcare benefits. Of course, all of those benefits have to come from somewhere. Railroad employers contribute to a separate tax system from the normal FICA tax. Instead, their taxes fall under something called the Railroad Retirement Tax Act, or RRTA. Again, nothing about this is simple.

Under the RRTA, all “compensation” is supposed to be taxed. The way the RRTA is worded, it is not clear what exactly is counted as “compensation” and what is not. Regardless, in a workers’ compensation case there is often a claim for lost wages because of your injury. Under the RRTA, lost wages are supposed to be counted as lost wages and taxed. However, there is an open question in many parts of the country whether the judgment awarded in a workers’ compensation case, even if it contains lost wages, is “compensation” under the law.

In Alabama, however, there is no longer a question. In Norfolk Southern Railway Company v. Williams, the Alabama Court of Civil Appeals found that an award of lost wages in a railway employee’s workers’ compensation case are indeed taxable. As a result, the injured worker in that case had $19,188.31 deducted from the verdict the jury awarded them. This deduction was applied to the worker’s whole award, not just a specific part that was considered lost wages.

Again, it is almost insulting to the injured worker that they have to pay taxes on the award for their injury. Across the country, this issue is moving through the courts and there is a good chance that the United States Supreme Court will clarify the issue going forward. Hopefully, in the interest of fairness and doing the right thing by injured workers, the Supreme Court will decide that there should not be any taxes paid in these situations.

If you or someone you know has been involved in a work-related injury, you may have a claim for workers’ compensation. Having an experienced Alabama workers’ comp attorney on your side can make all the difference in getting a good result on your claim. Call INGRAM LAW LLC at (205) 335-2640 for a Birmingham workers’ compensation attorney you can count on.

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