Hello,
I have been trying to get a straight answer for a month now and cant seem to get one. My husband was hurt at work on May 23, 2005 and returned to work Jan 2, 2006. During that time he received workmans compenstion benefits. Now its tax time. Do we have to pay taxes on that money he collected or was that taken out of his checks? He did only received a portion of his total earned but no benefits were taken or his 401k. But was taxes taken. I dont know? Is it not a law that taxes are taken? Or do we have to pay on all of that money?
Please let me know anything!!
Thanks,
Hagas35

Generally speaking, Worker's comp benefits are nontaxable.
http://www.irs.gov/publications/p525/ar02.html#d0e4434

Thank you so much for you info and the link. Very helpful. I see that you dont even report that you made the money. Interesting.. I wonder what that will do when we file? Is it a better thing to be in a lower tax bracket? Or will it hurt us? I know not related to labor law. But THANK YOU SO MUCH.
Hagas35

Yes, you may end up in the next lowest marginal tax bracket. A good tax preparer should be able to answer all your specific questions.