Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.
Q. I didn't work last year because I was on disability and received workers' compensation checks for disability. Do I have to pay taxes on that income?
A. Generally, benefits received by an employee under a workers' compensation act, and paid due to a work-related injury or illness, are not taxable. However, the IRS has stated that benefits which continue to be paid after the employee returns to work are taxable, even if the payments are substantially reduced. The IRS has also stated that this "exclusion" from income will not apply to retirement benefits you receive based on your age, length of service or prior contributions to the plan, even if you retired because of an occupational injury or sickness.
Howard D. Jacobs, CPA, Pikesville
To ask a tax question, call Sundial, The Sun's telephone information service, at (410) 783-1800. Call 268-7736 in Anne Arundel County, 836-5028 in Harford County, 848-0338 in Carroll County. Using a touch-tone phone, punch in the four-digit code 6225 after the greeting. You can also submit questions by e-mail to: www.sunspot.net. Click on Business.