The Internal Revenue Service is being pressed to provide more awareness of tax breaks for victims and survivors of terrorist attacks such as 9/11, including first responders.
In the months following 9/11, Congress passed a law known as the Victims of Terrorism Tax Relief Act of 2001. Among other provisions, it excludes from gross income any disability income received due to a terroristic or military action which occurred either inside or outside the United States. While the IRS initially provided guidance on the tax relief, in Publication 3920, which it released in February 2002, there has been little publicity about it in recent years, or awareness among taxpayers and practitioners, even though many 9/11 survivors and first responders continue to receive disability income as they struggle with lingering health problems.
Sen. Kirsten Gillibrand, D-N.Y., has been pressing the IRS to update Publication 3920 and provide up-to-date examples of how it can be used by 9/11 survivors and first responders. In early April, with tax day approaching, she announced that the IRS had updated and clarified its guidelines to ensure that it’s clear that those that have fallen ill due to their work after 9/11 are still entitled to the tax benefits provided by the law. She had written a letter in March to IRS commissioner John Koskinen urging him to update the publication, and he had agreed to do so.
The IRS has added a cover letter with some additional information on disability payments, explaining that it replaces the information later in the publication, but the IRS has still not fully updated the publication nor publicized the information in recent years. The New York Daily News reported Sunday that Gillibrand telephoned Koskinen last Friday to follow up. He immediately pledged to provide the updated information, and Gillibrand thanked him.
The IRS said that updating the publication is a priority. "The IRS has taken a number of recent steps to assist victims of 9/11 and will continue to take more actions going forward," the IRS said in a statemeant emailed to Accounting Today. "Employees working the special phone line for these victims are answering questions about the exclusion from income for disability payments and tax forgiveness for deaths related to 9/11 illnesses. Our regular phone assistors have been reminded to route these calls to the special help line. In addition, there are a number of web pages with information on IRS.gov to help victims. This includes Publication 3920, Tax Relief for Victims of Terrorism Attacks. Publication 3920 has been updated with a new cover page with important information until the full publication can be reissued later this year: http://www.irs.gov/pub/irs-pdf/p3920.pdf. As Commissioner Koskinen has indicated, this is a priority area and we will continue to work on these and other related issues."
Gillibrand outlined the importance of updating the information this past April. “Our 9/11 heroes who answered the call of duty deserve clear, unequivocal guidelines on the tax relief that they are entitled to,” Gillibrand said in a statement. “Sadly, thousands of our injured and sick heroes and the families of the dying face unnecessary obstacles because of a bureaucratic blunder or are unaware of their right to a tax refund. The IRS is taking the right steps to update and clarify its publications and I will continue to fight for our responders to ensure they get back the tax benefits they are owed.”
Under the current Victims of Terrorism Tax Relief law, if an individual receives disability or other benefits as a result of their illness or injury linked to a terrorist attack, including September 11th, those benefits are non-taxable. In addition, if an individual dies as a result of a terrorist act, his or her family is entitled to at least a $10,000 refund. The IRS Publication 3920: Tax Relief for Victims of Terrorist Attacks, however, did not adequately explain that disability payments for 9/11-related injuries are also exempt from taxes since the rules were published in 2002. The document also did not make clear that the families of those that have died from 9/11-related illnesses or injuries are entitled to an income tax refund of at least $10,000.
As a result, many employers, as well as the victims of terrorism themselves, were not aware of this law and 9/11 responders and survivors ended up being taxed on their disability payments. Senator Gillibrand pushed the IRS to update its publications to employers and urged the agency to update their eligibility guidelines for individuals and employers since many are eligible to apply for retroactive tax refunds, making clear that those still suffering from injury, or the family of those who have died since 2002 would still be eligible for this tax benefit.