Discussion:Military Pay Exclusion
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Discussion Forum Index --> Basic Tax Questions --> Military Pay Exclusion
Discussion Forum Index --> Tax Questions --> Military Pay Exclusion
| 14 April 2010 | |
| Client is a financial advisor with one of the national brokerage firms; he is a reservist who was called for a tour of duty in Iraq and spent the first 4 months of 2009 in Iraq as an officer. He has a W-2 from the military with the amount excluded in Box 14. He claims that his income from the brokerage firm during those 4 months is also exempt from taxation as military pay but I can't find anything that backs up this claim. | |
| 14 April 2010 | |
| Section 112 excludes only military compensation earned in a combat zone from tax. Civilian employment paid during time of activation is referred to often as differential pay and under Rev Rul 69-136 was not treated as wages and wasn't subject to withholding. Section 105 of the HEART Act (PL 110-245) amended 3401 to add section 3401(h) defining differential pay as wages. | |
| 15 April 2010 | |
| Janet - thank you!
Using the info from Janet, here are some links that pop up for the HEART Act and Rev Rul 69-136:
Just to pull everything together in case it helps anybody. | |
| 15 April 2010 | |
| I believe the HEART is dealing with pension issues and whether differential wages can be counted towards pension benefits; but the bottom line is that the taxpayer cannot exclude income from his civilian employer, only the military compensation, correct? | |
| 15 April 2010 | |
| If anybody's going to know this stuff, it'd be Fentax; check her user page! But to your question; HEART does what you described and more. Here's a short quote from N10-15, linked above:
"Prior to the enactment of the HEART Act, these payments, commonly referred to as “differential wage payments,” were not treated as wages for Federal employment tax purposes, pursuant to Rev. Rul. 69-136, 1969-1 C.B. 252. Section 105(a) of the HEART Act amends § 3401 of the Code to treat differential wage payments as wages for income tax withholding purposes." Also, from the technical explanation of the bill, in the part about "sec. 105 of the bill and secs. 3401 and 414(u) of the Code," "The provision includes as wages the employer’s payment of any differential wage payment to the employee." | |
