Sunday, January 25, 2009

More tricky terminology

Another confusing distinction is the difference between Unemployment Compensation and Workers' Compensation.

They both go to workers and they both include the term "compensation," but they are two entirely different programs. Both are social insurance programs that are financed by required payments made by all employers.

Unemployment compensation, also known as unemployment insurance, goes to workers who have been laid off from their jobs, while workers compensation goes to workers with job-related injuries that cause lost wages.

Neither program is "means-tested." So if a wealthy executive is laid off, he is entitled to unemployment compensation benefits, even if he has large amounts of investment income or a highly-paid spouse who continues to work. Similarly, he will be entitled to workers comp benefits if he is injured on the job.

Unemployment compensation is taxable. Taxpayers should receive a 1099-G from the government stating the amount of unemployment benefits received during the past year, along with the amount of any taxes withheld on those benefits. If the worker did not receive a 1099-G or has lost it, he can look up the amount of his benefits and withholding on the NYS Department of Labor website. I have posted a link to that site on the dashboard for live returns.

Workers' compensation is not taxable.

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