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Workers' Compensation
1
Amounts you receive as workers’ compensation for an occupational sickness or injury are generally excluded from income if they’re paid under a workers’ compensation law or statute. This type of income is not included on your tax return using the TaxAct program. If you have received an IRS Form W-2 Wage and Tax Statement for this income, you can use the workaround method outlined below.

To enter an adjustment to offset the W-2 income, if necessary, follow the steps below. 

Online
Dashboards
  1. From within your TaxAct return, click Income.
    • On smaller devices, click the menu at the top left corner of your screen, then make your selection. 
  2. Expand the Explore More topic.
  3. Click Add beside Other Income. 
  4. Continue until you see the Other Income screen. Scroll down and use the section Other Income to enter a Description and amount. Enter the adjustment amount, typically Box 1 of Form W-2, as a negative number.
  5. Click Continue and complete the rest of the interview process. 
Classic Navigation
  1. From within your TaxAct return, click Federal.
    • On smaller devices, click the menu at the top left corner of your screen, then make your selection. 
  2. Click the Other Income drop-down, then click Prizes, awards or other miscellaneous income.
  3. On the screen titled Miscellaneous - Amounts Received, use the data entry fields to enter the Description and amount. Enter the adjustment amount, typically Box 1 of Form W-2, as a negative number.
  4. Click Continue and complete the rest of the interview process. 
Desktop
  1. From within your TaxAct return, click Federal.
  2. Click the Other Income drop-down, then click Prizes, awards or other miscellaneous income.
  3. On the screen titled Miscellaneous - Amounts Received, use the data entry fields to enter the Description and amount. Enter the adjustment amount, typically Box 1 of Form W-2, as a negative number.
  4. Click Continue and complete the rest of the interview process. 
This entry will result in an adjustment on Line 8 of Schedule 1 (Form 1040) Additional Income and Adjustments to Income. When the return is printed, a supporting details sheet will print with the description and amount to explain the adjustment.
The adjustment does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retire because of an occupational sickness or injury.
If you return to work after qualifying for workers' compensation, payments you continue to receive while assigned to light duties are taxable. Report these payments as wages on Line 1 of Form 1040, U.S. Individual Income Tax Return.
If your disability pension is paid under a statute that provides benefits only to employees with service-connected disabilities, part of it may be workers' compensation. That part is exempt from tax. The rest of your pension, based on years of service, is taxable as pension or annuity income. If you die, the part of your survivors' benefit that is a continuation of the workers' compensation is exempt from tax.

CAUTION! If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. For a discussion of the taxability of these benefits, see IRS Publication 525.