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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
• They’re part of the duties that you must ex- rules may apply. See Foreign Employer in Pub. • Any bonus payment by a state or political
ercise for, or on behalf of, the religious or- 525. subdivision because of service in a combat
der as its agent. Employment abroad. For information on the zone.
If you’re an employee of a third party, the serv- tax treatment of income earned abroad, see
ices you perform for the third party won’t be Pub. 54. Volunteers
considered directed or required of you by the
order. Amounts you receive for these services Military The tax treatment of amounts you receive as a
are included in your income, even if you have volunteer worker for the Peace Corps or similar
taken a vow of poverty. agency is covered in the following discussions.
Payments you receive as a member of a military
Example. Mark Brown is a member of a re- service are generally taxed as wages except for Peace Corps. Living allowances you receive
ligious order and has taken a vow of poverty. retirement pay, which is taxed as a pension. Al- as a Peace Corps volunteer or volunteer leader
He renounces all claims to his earnings and lowances generally aren’t taxed. For more infor- for housing, utilities, household supplies, food,
and clothing are generally exempt from tax.
turns over his earnings to the order. mation on the tax treatment of military allowan-
Mark is a schoolteacher. He was instructed ces and benefits, see Pub. 3, Armed Forces' Taxable allowances. The following allow-
by the superiors of the order to get a job with a Tax Guide. ances, however, must be included in your in-
private tax-exempt school. Mark became an Differential wage payments. Any payments come and reported as wages.
employee of the school, and, at his request, the made to you by an employer during the time
school made the salary payments directly to the you’re performing service in the uniformed serv- • Allowances paid to your spouse and minor
children while you’re a volunteer leader
order. ices are treated as compensation. These wages training in the United States.
Because Mark is an employee of the school, are subject to income tax withholding and are
he is performing services for the school rather reported on a Form W-2. See the discussion • Living allowances designated by the Direc-
than as an agent of the order. The wages Mark under Miscellaneous Compensation, earlier. tor of the Peace Corps as basic compen-
earns working for the school are included in his sation. These are allowances for personal
income. Military retirement pay. If your retirement pay items such as domestic help, laundry and
is based on age or length of service, it’s taxable clothing maintenance, entertainment and
Foreign Employer and must be included in your income as a pen- recreation, transportation, and other mis-
sion on lines 5a and 5b of Form 1040 or
cellaneous expenses.
Special rules apply if you work for a foreign em- 1040-SR. Don’t include in your income the • Leave allowances.
amount of any reduction in retirement or re-
ployer. tainer pay to provide a survivor annuity for your • Readjustment allowances or termination
U.S. citizen. If you’re a U.S. citizen who works spouse or children under the Retired Service- payments. These are considered received
in the United States for a foreign government, man's Family Protection Plan or the Survivor by you when credited to your account.
an international organization, a foreign em- Benefit Plan.
bassy, or any foreign employer, you must in- For more detailed discussion of survivor an- Example. Gary Carpenter, a Peace Corps
clude your salary in your income. nuities, see Pub. 575, Pension and Annuity In- volunteer, gets $175 a month as a readjustment
allowance during his period of service, to be
Social security and Medicare taxes. come. paid to him in a lump sum at the end of his tour
You’re exempt from social security and Medi- Disability. If you’re retired on disability, see of duty. Although the allowance isn’t available
care employee taxes if you’re employed in the Military and Government Disability Pensions to him until the end of his service, Gary must in-
United States by an international organization under Sickness and Injury Benefits, later. clude it in his income on a monthly basis as it’s
or a foreign government. However, you must credited to his account.
pay self-employment tax on your earnings from Veterans' benefits. Don’t include in your in-
services performed in the United States, even come any veterans' benefits paid under any Volunteers in Service to America (VISTA). If
though you aren’t self-employed. This rule also law, regulation, or administrative practice ad- you’re a VISTA volunteer, you must include
applies if you’re an employee of a qualifying ministered by the Department of Veterans Af- meal and lodging allowances paid to you in
wholly owned instrumentality of a foreign gov- fairs (VA). The following amounts paid to veter- your income as wages.
ernment. ans or their families aren’t taxable. National Senior Services Corps programs.
Employees of international organizations or • Education, training, and subsistence allow- Don’t include in your income amounts you re-
foreign governments. Your compensation for ances. ceive for supportive services or reimburse-
official services to an international organization • Disability compensation and pension pay- ments for out-of-pocket expenses from the fol-
is exempt from federal income tax if you aren’t a ments for disabilities paid either to veter- lowing programs.
citizen of the United States or you’re a citizen of ans or their families. • Retired Senior Volunteer Program (RSVP).
the Philippines (whether or not you’re a citizen
of the United States). • Grants for homes designed for wheelchair • Foster Grandparent Program.
Your compensation for official services to a living. • Senior Companion Program.
foreign government is exempt from federal in- • Grants for motor vehicles for veterans who Service Corps of Retired Executives
come tax if all of the following are true. lost their sight or the use of their limbs. (SCORE). If you receive amounts for suppor-
• You aren’t a citizen of the United States or • Veterans' insurance proceeds and divi- tive services or reimbursements for
you’re a citizen of the Philippines (whether dends paid either to veterans or their bene- out-of-pocket expenses from SCORE, don’t in-
or not you’re a citizen of the United States). ficiaries, including the proceeds of a veter- clude these amounts in gross income.
• Your work is like the work done by employ- an's endowment policy paid before death. Volunteer tax counseling. Don’t include in
ees of the United States in foreign coun- • Interest on insurance dividends you leave your income any reimbursements you receive
tries. on deposit with the VA. for transportation, meals, and other expenses
• The foreign government gives an equal ex- • Benefits under a dependent-care assis- you have in training for, or actually providing,
emption to employees of the United States tance program. volunteer federal income tax counseling for the
in its country. • The death gratuity paid to a survivor of a elderly (TCE).
You can deduct as a charitable contribution
Waiver of alien status. If you’re an alien member of the Armed Forces who died af- your unreimbursed out-of-pocket expenses in
who works for a foreign government or interna- ter September 10, 2001. taking part in the volunteer income tax assis-
tional organization and you file a waiver under • Payments made under the compensated tance (VITA) program. See Pub. 526.
section 247(b) of the Immigration and National- work therapy program.
ity Act to keep your immigrant status, different
Chapter 5 Wages, Salaries, and Other Earnings Page 51