Is Worker's Comp money considered taxable?

[GameDude]

If I want to take a qualified distribution from IRA, would this money be considered taxable income?

For instance, if I have $50,000 in Worker's Compensation income and wanted to take $15,000 (10% rate) out of an IRA, would the IRA be taxed at the $15,000 income level (10%) only or would it be taxed at the $65,000 level (25% tax) ($50,000+$15,000)?

So, would I have to pay approx $1500 for taxes or $3750? Thanks!

 

[Cormier6083]

o_0

 

[cletus]

http://www.irs.gov/publications/p525/index.html

[quote name='Pub 525']Workers' Compensation

Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. The exemption also applies to your survivors. The exemption, however, 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 retired because of an occupational sickness or injury.[/quote]

I don't know if the rules are different when it comes to IRA withdraws though. You should call the IRS when the tax season starts and see what they say.

 

[GameDude]

thanks. I appreciate it!