Engraved on the exterior of the IRS headquarters is this simple phrase: “Taxes are what we pay for a civilized society.” Attributed to United States Supreme Court Justice Oliver Wendell Holmes, Jr.; the quote is a reminder that the many benefits we enjoy as citizens of the United States come at a cost. We all give a portion of our income to the government so that we may drive on safe roads and bridges, send our kids to public school, take a walk in a park, and receive government benefits like Social Security Disability.
Some people, however, give more than money to ensure that we can all live in a free and safe society. First responders often pay for our security with their health or their life. In New York City, we are all too aware of the high price paid by those who risked their own health and safety to protect the rest of us following the 9/11 terrorist attacks.
As a small token of our appreciation, Congress has declared that certain benefits received by 9/11 first responders are not taxable as income. Unfortunately, a lot of people who have already given so much to this country are unaware of this, and are over-paying their taxes. Seelig Law Offices is working to raise awareness of the tax relief available to first responders and victims of 9/11.
Under the Victims of Terrorism Tax Relief Act of 2001, the following amounts are not included in income.
- Certain disability payments received in tax years ending after September 10, 2001, for injuries sustained in a terrorist attack.
- Payments from the September 11th Victim Compensation Fund of 2001.
- Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack.
- Death benefits paid by an employer to the survivor of an employee if the benefits are paid because the employee died as a result of a terrorist attack.
As a law firm that does a lot of work in the disability benefits arena, we want to focus on the first bullet point above.
For tax years ending after September 10, 2001, disability payments (including Social Security Disability Insurance (SSDI) payments) are not included in income if they are for injuries incurred as a direct result of a terrorist attack (including the September 11 attacks, anthrax attacks, and the Oklahoma City bombing in 1995) directed against the United States (or its allies).
If you have been including these payments in your income because you did not know about this law, you may be able to get some of your overpayments refunded.
This is great news, and it has really helped take some financial strain off our first-responder clients.
However, it is important to note that you must include in your income any disability payments you received or you would have received in retirement had you not become disabled as a result of a terrorist attack. Disability payments you receive for injuries not incurred as a direct result of a terrorist attack or for illnesses or diseases not resulting from an injury incurred as a direct result of a terrorist attack cannot be excluded from your income under this provision but may be excludable for other reasons.
Our firm is helping victims of the 9/11 attacks make the case that the majority of their disability benefits should not be counted as income. We help our clients tell their stories so their fate is not decided by a bureaucrat checking a box or making an arbitrary decision on what percentage of disability is 9/11 related.
If you have questions about what disability benefits you may be eligible for, and how those benefits are treated for tax purposes, please contact the Seelig Law Group to schedule an initial consultation.