civilian working in combat zone

[taxdude71]

Works in conjuction with military unit. Was sent in 2005. W-2 for 2005 was generated as $0 taxable income. Still worked in Iraq for most of 2006. Was on workers comp for a few months in the state (hostile fire related). This year, the W-2 has the entire pay listed as income. Anyone else have this situation?

[taxmandan]

Works in conjuction with military unit. Was sent in 2005. W-2 for 2005 was generated as $0 taxable income. Still worked in Iraq for most of 2006. Was on workers comp for a few months in the state (hostile fire related). This year, the W-2 has the entire pay listed as income. Anyone else have this situation?

Who issued the 2005 W-2, US of A or some private company? There has been a lot of misunderstanding about civilians working in hostile areas of the world for our military. They don't qualify for many of the tax benefits the the military do, but they get told that they do by the company or their buddy in the bar after work.

[taxdude71]

Was paid by a foriegn company from the UAE. Statement from employeer states that the income is not taxable for US purposes.

[Bill Tubbs]

Feie

Was paid by a foriegn company from the UAE. Statement from employeer states that the income is not taxable for US purposes.

I'm guessing they figured it was not taxable for US purposes IF taxpayer qualifies for the Foreign Earned Income Exclusion. I am not aware of any provision for a civilian to have tax-free income solely because of a war-zone.

Bill

[taxdude71]

Thanks, that makes sense now. Next questions would be regarding when he was on work comp. Since he took that state side, it is obviously taxable income. Would this not also dicredit him from taking the foreign tax exclusion (he was not in the country for 365 days)?