Page 56 - 2020 Publication 17

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Volunteer firefighters and emergency medi- retirement age is generally the age at which you c. Takes place under conditions simulat-
cal responders. If you are a volunteer fire- can first receive a pension or annuity if you’re ing war, including training exercises
fighter or emergency medical responder, don’t not disabled. such as maneuvers; or
include in your income the following benefits You may be entitled to a tax credit if d. Is caused by an instrumentality of war.
you receive from a state or local government. TIP you were permanently and totally disa-
• Rebates or reductions of property or in- bled when you retired. For information 4. You would be entitled to receive disability
come taxes you receive because of serv- on this credit and the definition of permanent compensation from the Department of Vet-
ices you performed as a volunteer fire- and total disability, see Pub. 524, Credit for the erans Affairs (VA) if you filed an applica-
fighter or emergency medical responder. Elderly or the Disabled. tion for it. Your exclusion under this condi-
tion is equal to the amount you would be
• Payments you receive because of services Beginning on the day after you reach mini- entitled to receive from the VA.
you performed as a volunteer firefighter or mum retirement age, payments you receive are
emergency medical responder, up to $50 taxable as a pension or annuity. Report the pay- Pension based on years of service. If you
for each month you provided services. ments on lines 5a and 5b of Form 1040 or receive a disability pension based on years of
The excluded income reduces any related tax 1040-SR. The rules for reporting pensions are service, in most cases you must include it in
your income. However, if the pension qualifies
or contribution deduction. explained in Disability Pensions in Pub 575. for the exclusion for a service-connected disa-
For information on disability payments from bility (discussed earlier), don’t include in income
Sickness and Injury a governmental program provided as a substi- the part of your pension that you would have re-
tute for unemployment compensation, see Un-
Benefits employment Benefits in chapter 8. ceived if the pension had been based on a per-
centage of disability. You must include the rest
Retirement and profit-sharing plans. If you of your pension in your income.
This section discusses sickness and injury ben- receive payments from a retirement or
efits, including disability pensions, long-term profit-sharing plan that doesn’t provide for disa- Retroactive VA determination. If you retire
care insurance contracts, workers' compensa- bility retirement, don’t treat the payments as a from the armed services based on years of
tion, and other benefits. disability pension. The payments must be re- service and are later given a retroactive serv-
ice-connected disability rating by the VA, your
In most cases, you must report as income ported as a pension or annuity. For more infor- retirement pay for the retroactive period is ex-
any amount you receive for personal injury or mation on pensions, see Pub 575. cluded from income up to the amount of VA dis-
sickness through an accident or health plan that Accrued leave payment. If you retire on disa- ability benefits you would have been entitled to
is paid for by your employer. If both you and bility, any lump-sum payment you receive for receive. You can claim a refund of any tax paid
your employer pay for the plan, only the amount accrued annual leave is a salary payment. The on the excludable amount (subject to the stat-
you receive that is due to your employer's pay- payment is not a disability payment. Include it in ute of limitations) by filing an amended return
ments is reported as income. However, certain your income in the tax year you receive it. on Form 1040-X for each previous year during
payments may not be taxable to you. For infor- the retroactive period. You must include with
mation on nontaxable payments, see Military each Form 1040-X a copy of the official VA De-
and Government Disability Pensions and Other Military and Government termination letter granting the retroactive bene-
Sickness and Injury Benefits, later in this dis- Disability Pensions fit. The letter must show the amount withheld
cussion. Certain military and government disability pen- and the effective date of the benefit.
Don’t report as income any amounts sions aren’t taxable. If you receive a lump-sum disability sever-
TIP paid to reimburse you for medical ex- Service-connected disability. You may be ance payment and are later awarded VA disa-
bility benefits, exclude 100% of the severance
penses you incurred after the plan was able to exclude from income amounts you re-
established. ceive as a pension, annuity, or similar allow- benefit from your income. However, you must
include in your income any lump-sum readjust-
Cost paid by you. If you pay the entire cost of ance for personal injury or sickness resulting ment or other nondisability severance payment
from active service in one of the following gov-
a health or accident insurance plan, don’t in- ernment services. you received on release from active duty, even
clude any amounts you receive from the plan if you’re later given a retroactive disability rating
for personal injury or sickness as income on • The armed forces of any country. by the VA.
your tax return. If your plan reimbursed you for • The National Oceanic and Atmospheric Special period of limitation. In most ca-
medical expenses you deducted in an earlier Administration. ses, under the period of limitation, a claim for
year, you may have to include some, or all, of credit or refund must be filed within 3 years
the reimbursement in your income. See What If • The Public Health Service. from the time a return was filed or 2 years from
You Receive Insurance Reimbursement in a • The Foreign Service. the time the tax was paid. However, if you re-
Later Year? in Pub. 502, Medical and Dental ceive a retroactive service-connected disability
Conditions for exclusion. Don’t include
Expenses. the disability payments in your income if any of rating determination, the period of limitation is
Cafeteria plans. In most cases, if you’re cov- the following conditions apply. extended by a 1-year period beginning on the
ered by an accident or health insurance plan date of the determination. This 1-year extended
through a cafeteria plan, and the amount of the 1. You were entitled to receive a disability period applies to claims for credit or refund filed
insurance premiums wasn’t included in your in- payment before September 25, 1975. after June 17, 2008, and doesn’t apply to any
come, you aren’t considered to have paid the 2. You were a member of a listed govern- tax year that began more than 5 years before
premiums and you must include any benefits ment service or its reserve component, or the date of the determination.
you receive in your income. If the amount of the were under a binding written commitment Terrorist attack or military action. Don’t in-
premiums was included in your income, you’re to become a member, on September 24, clude in your income disability payments you
considered to have paid the premiums, and any 1975. receive for injuries incurred as a direct result of
benefits you receive aren’t taxable. a terrorist attack directed against the United
3. You receive the disability payments for a States (or its allies), whether outside or within
Disability Pensions combat-related injury. This is a personal the United States or from military action. See
injury or sickness that:
Pub. 3920 and Pub. 907 for more information.
If you retired on disability, you must include in a. Results directly from armed conflict;
income any disability pension you receive under b. Takes place while you’re engaged in
a plan that is paid for by your employer. You extra-hazardous service;
must report your taxable disability payments as
wages on line 1 of Form 1040 or 1040-SR until
you reach minimum retirement age. Minimum
Page 52 Chapter 5 Wages, Salaries, and Other Earnings