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Lev
Lev, Tax Advisor
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Experience:  Taxes, Immigration, Labor Relations
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Military, Fire Fighters and Police officers are tax exempt

Resolved Question:

Military, Fire Fighters and Police officers are tax exempt on their dissability retirements for life is that correct?
Submitted: 4 years ago.
Category: Tax
Expert:  Lev replied 4 years ago.

yes - if that is a service connected disability.

See for reference IRS publication 525 - www.irs.gov/pub/irs-pdf/p525.pdf

You may be able to exclude from income amounts you receive as a pension, annuity, or similar allowance for personal injury or sickness resulting from active service in one of the following government services.

  • The armed forces of any country.

  • The National Oceanic and Atmospheric Administration.

  • The Public Health Service.

  • The Foreign Service.

Conditions for exclusion. Do not include the disability payments in your income if any of the following conditions apply.

  1. You were entitled to receive a disability payment before September 25, 1975.

  2. You were a member of a listed government service or its reserve component, or were under a binding written commitment to become a member, on September 24, 1975.

  3. You receive the disability payments for a combat-related injury. This is a personal injury or sickness that:

    • Results directly from armed conflict,

    • Takes place while you are engaged in extra-hazardous service,

    • Takes place under conditions simulating war, including training exercises such as maneuvers, or

    • Is caused by an instrumentality of war.

  4. You would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) if you filed an application for it. Your exclusion under this condition is equal to the amount you would be entitled to receive from the VA.

If you receive a disability pension based on years of service, you generally must include it in your income. However, if the pension qualifies for the exclusion for a service-connected disability, do not include in income the part of your pension that you would have received if the pension had been based on a percentage of disability. You must include the rest of your pension in your income.

 

Let me know if you need any help.

 

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22642
Experience: Taxes, Immigration, Labor Relations
Lev and 6 other Tax Specialists are ready to help you
Customer: replied 4 years ago.
I included Firefighters and Police with Military because I was told Firerfighters are also tax exempt on their dissability retirements for life. I am a retired firefighter with a perminate dissability.
Expert:  Lev replied 4 years ago.

Military, Fire Fighters and Police officers are tax exempt on their disability retirements for life is that correct?

That is not correct.

Only service-connected disability benefits are excluded from taxable income. Conditions for such exclusion are listed above.

 

If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A until you reach minimum retirement age. Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled.

Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A.

 

Please also be aware - if your disability pension is paid under a statute that provides benefits only to employees with service-connected disabilities, part of it may be workers' compensation. That part is exempt from tax. The rest of your pension, based on years of service, is taxable as pension or annuity income.

 

Let me know if you need any help.

 

Customer: replied 4 years ago.
My disability was directly connected to the fire service under the Artical 31 Heart Lung Bill of the IAFF Local 1908 Sorry I should have provided that info with my first request.
Expert:  Lev replied 4 years ago.

These payments are similar to workers' compensation and generally are not taxable.

You need to keep all supporting documents about your benefits with your tax papers.

 

Customer: replied 4 years ago.
You have not given me an acceptable answer and therefore I donen't know anymore than I did before. Like I said I retired from the FD due to an illness directly related to the fire service and received a disability retirement. Looks like I will have to go to a tax atty. I feel that I should be refunded.
Expert:  Lev replied 4 years ago.

As I said - disability benefits are generally taxable.

There are two situations when disability benefits would not be taxable:

-- if that is a service-connected disability - conditions for such exclusion are listed above.

-- if payments are made under workers' compensation act of similar provisions.

 

Please be aware that answers posted on that site are for general information, and are not intended to substitute for informed professional advice and do not establish a professional-client relationship.

Thus I may help you to determine if your benefits are taxable and provide references to IRS sources, but I am not in the position to make a determination.

Based on facts that your provided - "retired from the FD due to an illness directly related to the fire service" - I assume that all or part of your benefits are similar to workers' compensation and generally are not taxable.

 

The administrator of your pension fund should issue a form 1099-R - www.irs.gov/pub/irs-pdf/f1099r.pdf which reports your disability benefits.

Your gross benefits should be reported in the box 1, and taxable portion in the box 2a.

If your benefits are not taxable - in the box 2a you will have zero.

 

Please be aware that the same information is provided to the IRS - so if the administrator reports your benefits as taxable and you disagree with such determination - that should be discussed with your administrator.

 

Let me know if you need any help.

 

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