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Benefits paid under FECA

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    Benefits paid under FECA

    Taxpayer claims her pay is exempt under the Federal Employees' Compensation Act(FECA) - payments you receive for personal injuries or sickness resulting from the performance of your duties are like workers' compensation. They are tax exempt and are not treated as disability income or annuities.

    She received a W-2 for the sick leave pay and a 1099R for disability annuity that kicked in after concluded the injury was a permanent disability. If this income was indeed tax exempt shouldn't it have been reported as such on the W-2 and 1099R? Or should it have been my responsibility to conclude this and back it out of taxable income?

    I'm totally confused on this one!
    http://www.viagrabelgiquefr.com/

    #2
    Is she a federal employee? Was she injured on the job? Did she file a claim with the Office of Worker's Compensation Program for benefits? They handle these claims, and it does not seem as though this may be the situation, since she is receiving a W-2 for disability benefits (employer-paid plan is taxable) and a 1099-R for subsequent payments. She should have paperwork on this situation. Ask her for it.

    Comment


      #3
      Is she a federal employee?
      State Department of Natural Resource - Warden - claims public safety dept covered under FECA?

      Was she injured on the job?
      Yes

      Did she file a claim with the Office of Worker's Compensation Program for benefits?
      Not sure - payments came from the State

      This is a friend of a friend asking advice so I'm confused on the entire situation. I have copies of the returns from 2005 to 2009 and they would like to amend. For one, even if incorrect they will only be able to amend the last 3 year (assuming they filed timely), so for 2005 and 2006 they are just SOL, correct?

      Second, dumb question of the day, would a State worker be considered under FECA? She claims because she is a public servant she is.
      http://www.viagrabelgiquefr.com/

      Comment


        #4
        It does not appear that a state employee would be covered under this plan for federal employees. However, I am no expert on this subject. Suggest the following cite:



        Note Page 5 under "Who is Covered," specifically questions A-3 and A-4. A-3 says "...all civilian employees of the United States,...." as well as certain other federal organizations of which persons may be affiliated. A-4 says "FECA coverage is extended to Federal employees......" You will have to check to see whether or not your/her state may have such a program. But to answer your original question, it is not up to you to back it out of income on her tax return based on what she has given you so far. And she has been receiving benefits since 2005? What made her bring this up now?

        She may also contact the OWCP for further information on the program.
        Last edited by Burke; 08-31-2010, 12:04 PM.

        Comment


          #5
          Thanks Burke for the information. The only statement I see that a state law enforcement officer might be covered is "non-Federal law enforcement officers under certain circumstances involving crimes against the United States". And her injury had no crime involvement.

          She said she has been trying to get someone to listen to her case since 2005 and just now has an IRS agent from the "dispute and resolution department" that is in agreement that this is tax exempt income. She said if it is an error on the administrations dept she can go back to 2005 by filing 1040X.
          http://www.viagrabelgiquefr.com/

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            #6
            Well, tell her to get it in writing from the IRS agent. Then there is always Tax Court. And there is the addl problem that this will have to be done every year going forward due to how it is being reported. Expect CP letters unless and until the issue is settled with the administrative office who is paying out the benefits, and the 1099 reporting is changed. What code is on the 1099-R? Code 3? Normally, this is treated as wages until normal retirement age, (line 7) then pension.
            Last edited by Burke; 08-31-2010, 12:12 PM.

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              #7
              I strongly suggested she go back to the original preparer for all amendments. I get the feeling she things I'm not competent because of the questions I ask when she was told by "proper authority" that the income is not taxable.
              http://www.viagrabelgiquefr.com/

              Comment


                #8
                It was a code 2 on the 1099R.
                http://www.viagrabelgiquefr.com/

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