I have a client ( sherriff ) who was injured in the line of duty. He claims to be able to report just half of his income on his return due to I.R.C. 1341 . When I spoke with the IRS, they had no idea what I was talkng about. When I spoke with the Franchise Tax Board of California, they told he he does not have to report the income form the disability on his return. Yet, he claims his employer ( state of california) claims he reports half of the income reported. Tried to research via IRS.GOV. Still need help?
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No Negative Cites
You will never find a citation that an alleged deduction is not really there. You know it isn't there because you can't find it after due and diligent research. -
I am not that conversant with IRC to know which sections contain certain benefits ... but if you approach this from whether the disability income is taxable or not, you get a maybe ...
I found this from the irs.gov
"I am receiving long-term disability. Is it considered taxable?
Generally, you must report as income any amount you receive for your disability through an accident or health insurance plan paid for by your employer.
If both you and your employer have paid the premiums for the plan, only the amount you receive for your disability that is due to your employers payments is reported as income...."
If county paid 1/2 of the disability premium and the sheriff paid 1/2 with after tax dollars ... it would only be 1/2 taxable income. Also, it is not unusal for states to not tax law enforsement disability.Comment
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For some reason IRC 104 is ringing a bell in my head. I am not at my office to review any research materials.Comment
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IRC 104 is it, I kept trying to work IRC 1341 ... somehow something paid for with taxed dollars in a previously year not taxable in current year ... but it does not work.Originally posted by MAMalody View Post
The only way that I could see IRC 1341 coming into play was if the sheriff continued to collect wages and paid taxes, and then this year paid the wages back because he collected disability for last year.Comment
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If this be the case the income should be reported on a W-2 with the amount that is not taxable in box 12 with a code j. Not sure about I.R.C. 1341, sorry can't be of more help, but it will keep the thread floating to the top for someone more knowledgeable.Originally posted by snowbird View Post
Agree with snowbird that it very well could be none of it is taxable for state purposes.Comment
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Would this be on a 1099-R with a 3 in Box 7 for disability income? However, one of his pre-disabilitly W-2's should have some thing in box 14 showing a after tax payment for disability insurance ...Originally posted by Jesse View PostComment
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Here in NY, LODI (Line of duty injury), is considered non taxable as if it was Workman's Comp> Not taxable. This applies to both Federal & State.Last edited by BOB W; 07-23-2008, 05:50 PM.This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
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How are the payments classified
How are the payments classified, as workman's compensation through the Calif Police Dept? What age is the t/p and how many years of service?
Has the State of California or Pension Plan through the Police Dept? converted to retirement benefits.
Seems like Sect 104 might be an answer, but further information would be necessary. There seems to be some past rulings.
So more information would be needed on your t/p to try to find the proper information.
I did find this, but it might not fit your t/p's circumstances. http://www.allbusiness.com/personal-.../265149-1.html
Please provide us with more information and maybe all on the board can find more.
SandyComment
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Check the website of the paying jurisdiction or the union. I know some LA County Sheriff's pensions are not fully taxed under the PLR at this link.:
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My experience has been that if any portion is taxable the employer will issue a W-2 or 1099R. If nothing is issued, it will be non-taxable.
Only in rare circumstances will a t/p need to question a W-2 or 1099R... In NY a 1099R is issued showing gross at $X,XXX.XX and taxable is blank.Last edited by BOB W; 07-23-2008, 08:03 PM.This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
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I suppose it would depend on the actual plan and I am not familiar with this situation. It does seem to make sense that if you are injured in the line of duty it would be an equivalent of work comp as you are injured at work.Originally posted by snowbird View Post
The disability plans that I have encountered have not been considered the equivalent of work comp. Most have been factory workers that have the option to purchase additional disability plans and when they collect the % attributed to the employee paid plan is not taxable and has been reported on a W-2 w/code J for the nontaxable portion.
I have not noticed any amounts in box 14, but I don't think that it is a requirement that it be reported as box 14 is supplemental information?Comment
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State of Ca disability
I have a client that receives a CA disability. He gets a 1099-R with xx,xxx amount of pay and minimal taxable income, less than a thousand.Comment
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