Should workers compensation appear as income on Form 1040?

Workers' compensation benefits you receive are generally not considered taxable income on your federal tax return. However, if you took an impairment related work expense deduction in previous years, you might owe income tax on some or all of your workers' compensation benefits. Additionally, if you did not report a portion of your workers' compensation benefits as income in an earlier year because they were not included in your total wages in box 1 of Form W-2, and you later recover any of the workers' compensation benefits that you did not report as income, you might owe income tax on the recovered amount.