Discussion:Combat pay exclusion for teachers?

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Discussion Forum Index --> Advanced Tax Questions --> Combat pay exclusion for teachers?

Discussion Forum Index --> Tax Questions --> Combat pay exclusion for teachers?

Taxtips (talk|edits) said:

3 November 2008
Combat pay exclusion for teachers? My client’s reserve unit was activated and shipped to Iraq. His civilian employer is a local public school district which has promised to pay him $1,000 per month while he is deployed in Iraq. My client insists that this pay is excludible as a “bonus”. I cannot find any provision in the law that would exclude civilian pay for service in a combat area.

CrowJD (talk|edits) said:

3 November 2008
Uniformed Services Employment and Reemployment Rights Act 38 USC Secs. 4301-4333. This sounds like differential pay. Check Rev. Ruling 69-136, differential payments made by a company to its former employees while they are in military service are not considered wages subject to income tax withholding, although the payments are still taxable to the employee. The reason for this is that the IRS considers the employer-employee relationship to be severed when an employee is called to active duty. Differential payments represent the difference between his civilian and military salary (i.e. his civilian salary is higher).

So, he should get a 1099 Misc. (Box 3). As far as I know, it's taxable as stated above. Note, as regards his benefits, they must treat him as if he had not severed his employement. I am making the assumption that a public school would be considered to be a "company" under the Act, may want to check that.

The employee must request of the employer that he be treated as covered by the Act.

Riley2 (talk|edits) said:

3 November 2008
New law. Internal Revenue Code § 134(b)(6), effective for payments made on or after 6/17/2008. A bonus paid by a local government for services in a combat zone is excludible from gross income.

Solomon (talk|edits) said:

3 November 2008
From PL 110-245: Heroes Earnings Assistance and Relief Tax Act.


                       MILITARY BENEFITS.
   (a) In General.--Section 134(b) (defining qualified military 

benefit) is amended by adding at the end the following new paragraph:

           ``(6) Certain state payments.--The term `qualified military 
       benefit' includes any bonus payment by a State or political 
       subdivision thereof to any member or former member of the 
       uniformed services of the United States or any dependent of such 
       member only by reason of such member's service in an combat zone 
       (as defined in section 112(c)(2), determined without regard to 
       the parenthetical).."

CrowJD (talk|edits) said:

3 November 2008

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