Worker’s Compensation and Taxes in Maryland

In Maryland, when an individual receives a worker’s compensation award, just like when receiving a personal injury award or a personal injury settlement in a case, they are getting that money tax-free. An individual does not have to pay taxes on a worker’s compensation award or a personal injury award.

If a worker’s compensation claim is denied for any reason, issues can be filed, a hearing will be set before the Commissioner, and a Maryland worker’s compensation lawyer can represent you. If the claim is denied for whatever reason—it could be that they do not think that the injury arose out of the scope of employment or they think that you were, in fact, an independent contractor and not an employee—if you get a lawyer, a lawyer can file issues and they can represent you in front of the Commission.

Average Weekly Wage

The average weekly wage in Maryland looks at the injured person’s gross wages for the 13 weeks prior to the injury. The average weekly wage is determined by taking an average of the past 13 weeks where wages were paid.  There is an online form on the Commission’s website called a Statement of Wage Information that the employee or their attorney will fill out and send in with their worker’s compensation claim. That calculation is used later on in the process when they are determining the amount of the benefits you are entitled to and for purposes of determining a permanency award

In Maryland, the tax is based upon gross wages, so it is calculated before any subtractions or deductions are made for tax purposes. It is calculated based upon gross wages and overtime wages and will not be considered when calculating an employee’s average weekly wage. However, the worker’s compensation award will be tax-free when paid out.

Misclassification of Independent Contractors

Usually, the employer’s misclassify their employees as independent contractors because they only have themselves in mind. If they want to classify groups of people as independent contractors rather than employees, usually for tax reasons—one of the main reasons they want to do it is that they will not have to provide benefits for those people. In other words, if a person is classifying someone as an independent contractor, they will typically not have to provide health benefits, retirement benefits and, of course, worker’s compensation benefits.

It might not necessarily be a misclassification but that is the reason why they want to try to classify them as independent contractors. Worker’s compensation insurance/benefits do not have to be provided to independent contractors. If an independent contractor wants access to these benefits, he/she has to take the necessary measures to obtain them.