Tax Court: Firefighter’s Disability Allowance Includible in Gross Income

Both the IRS and the U.S. Tax Court agree a retired firefighter’s disability allowance should be included in his gross income. The taxpayer, a retired firefighter, collecting disability pay from a benefit plan, argued his allowance should be excludable because it qualified under the section 104(a)(1) exclusion for workmen’s compensation. The firefighter pleaded his compensation, which was based on his age, the length of service and average final pay, was neither an annuity or pension.

The IRS, however, said the money is subject to tax because the disability pay was calculated based on the firefighter’s age and length of service. The Tax Court sided with the IRS, saying the allowance was not excludable because it satisfied the tax code’s general definition of a qualified pension plan.

To obtain tax advice related to your compensation, please consult with a Caroprese & Company professional.

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