Damage pay

[grannybear]

Client in Iraq for a year working for the army corp of engineers as a civilian.
Her paycheck stubs list "damage pay" as a separate item. The W2 doesn't report damage pay at all. Is the damage pay excludable from taxable income on the Form 1040?

[AuditorTurnedGood]

It depends

If he is working in certain capacities with the US Military in combat zones, or insupport of combat zones, he may be entitled to exclude his "combat pay" from gross income. IRS Pub 3 goes into specific detail on these semi-military private citizens working in combat zones.

ATG

[travis bickle]

But

If he is working in certain capacities with the US Military in combat zones, or insupport of combat zones, he may be entitled to exclude his "combat pay" from gross income. IRS Pub 3 goes into specific detail on these semi-military private citizens working in combat zones.

ATG

when you are working for the U.S. government [ ". . .Army Corps of Engineers. . ."] foreign earned income is not excludable.

My initial thoughts are:
1) the Army Corps of Engineer should know by now how to complete a W2, if they have not included the "damage pay" in the W2, it is not taxable;
2) sounds like some sort of "reimbursement" for whatever; and
3) need more info from the client.