Facts
Harry, a sheriff’s deputy, was injured on the job. He was allowed under his contract with the state to choose between $1,000 weekly sick-pay distributions or an $850 weekly workers’ compensation payment.
Issue(s)
Should Harry choose sick-pay or workers’ compensation based on the effects of income tax?
Conclusions
Harry’s best option is to select $850 weekly worker’s compensation payment, as such amount will be excluded from gross income. In comparation, the sick-pay distribution will be included in gross income, and thus increase his tax liability for this year.
Analysis and summary
IRC §3402 states the rules regarding income tax collected at source. IRC §3402(o)(2)(c) defines sick-pay as any amount paid to an employee pursuant to a
Harry, a sheriff’s deputy, was injured on the job. He was allowed under his contract with the state to choose between $1,000 weekly sick-pay distributions or an $850 weekly workers’ compensation payment.
Issue(s)
Should Harry choose sick-pay or workers’ compensation based on the effects of income tax?
Conclusions
Harry’s best option is to select $850 weekly worker’s compensation payment, as such amount will be excluded from gross income. In comparation, the sick-pay distribution will be included in gross income, and thus increase his tax liability for this year.
Analysis and summary
IRC §3402 states the rules regarding income tax collected at source. IRC §3402(o)(2)(c) defines sick-pay as any amount paid to an employee pursuant to a