My girlfriend was injuried on the job last August 2009 and drew workers compensation for about a month. She will also be getting a settlement of $240.00. Does she suppose to report the workers compensation on her tax return? What about the $240.00 settlement also? She lives in the state of Virginia.

For sure, the workman's compensation is tax-free.

The $240 settlement MAY be taxable if it replaces lost wages.

If it is for medical expenses incurred or pain-and-suffering, it is tax-free.