Disability Benefits

• § 13.01 Overview of Taxation of Disability Benefits
• —–[1] Nontaxable Disability Payments
• —–[2] Taxable Disability Payments
• —–[3] Plans Offering a Tax/Nontax Option
• —–[4] Transition from Disability Payments to Retirement Payments
• —–[5] Structured Settlement of a Disability Lawsuit or Workers’ Compensation Claim
• —–[6] Income Tax Withholding

• § 13.02 Disability Benefits Taxable or Nontaxable Due to Source of Contributions
• —–[1] Definition of Sourced Disability Benefits
• —–[2] Disability Benefits Entirely Nontaxable Due to Employee Contributions
• —–[3] Disability Benefits Entirely Taxable Due to Employer Contributions
• —–[4] Partially Taxable Disability Benefits Due to Partial Employer Funding
• ———-[a] Partial Employee Funding in General
• ———-[b] Individual Disability Insurance Policies
• ———-[c] Group Disability Insurance Policies
• ———-[d] Multi-Year Disability Covered by Group Insurance
• ———-[e] Uninsured Disability Plans
• ———-[f] More than One Class of Employees Covered by a Plan
• ———-[g] Plan Providing Both Disability Benefits and Other Types of Benefits
• —————[i] Contributions Made to Qualified Retirement Plans
• —————[ii] Contributions Made to Other Types of Multi-Benefit Plans
• —–[5] Corrections of Employer Errors or Methodology
• —–[6] Plans Offering Employees an After-Tax Contribution Option
• —–[7] Disability Benefits Paid to Former Employees
• —–[8] When Nontaxable Disability Benefits Convert to Taxable Retirement Benefits
• ———-[a] Conversion of Disability Benefits to Taxable Retirement Benefits Generally
• ———-[b] Disability Payments to First Responders Not Converted to Retirement Benefits
• —–[9] Disability Payments to Self-Employed Individuals
• —–[10] Payroll Taxes and Withholding from Disability Payments
• ———-[a] Disability Payments from Qualified Plans or Eligible State/Local Plans
• ———-[b] Disability Payments Under Other Types of Plans
• ———-[c] Social Security (or FICA) Tax Withholding on Disability Payments

• § 13.03 Disability Benefits Nontaxable Regardless of the Source of Funding
• —–[1] Categories of Nontaxable Disability Payments
• —–[2] Workers’ Compensation Benefits
• ———-[a] Common Types of Excludable Workers’ Compensation Benefits
• ———-[b] In the Nature of Workers’ Compensation
• —————[i] Qualifying as a Statute in the Nature of Workers’ Compensation
• —————[ii] Meaning of Certain Workers’ Compensation Terms
• —————[iii] Disability in the Course of Employment
• —————[iv] Effect of Presumptions
• —————[v] Effect of Poor Administration
• —————[vi] Payments Made Under the Qualifying Statute?
• ———-[c] Age, Length of Service, or Employee Contributions
• ———-[d] Choice of Disability or Retirement Provisions
• ———-[e] Retroactive Reclassifications of Benefits
• ———-[f] Conversion to Retirement Benefits
• ———-[g] Tax Treatment of Nonqualifying Benefits
• ———-[h] Workers’ Compensation Paid to Divorced Spouse of Employee
• —–[3] Payments for Loss of Limbs, Disfigurement, Etc.
• —–[4] Payments for Injuries Due to Actions of Terrorists or the Military
• —–[5] Disability Payments to Military Personnel and Others
• ———-[a] Only Certain Disability Payments Excludable from Gross Income
• ———-[b] Retroactive Corrections and Tax Refunds for Military Disability
• ———-[c] Entitlement to Disability Payments from the Department of Veterans Affairs
• —–[6] Disability Benefits Paid for Wrongful Acts (Torts)

• § 13.04 Structured Settlement of a Lawsuit or Workers’ Compensation

• § 13.05 Potential Conflicts Between Disability and Social Security Provisions

• § 13.06 Treatment of Interest, Medical Expenses, and Attorney’s Fees

• § 13.07 Tax on Net Investment Income Generally Not Applicable

• § 13.08 Power of Attorney Effective Upon Disability

» Chapter 14 – U.S. MILITARY RETIREMENT AND DISABILITY BENEFITS