A Tax Break on Terror-Related Disability Payments: Keep it in Mind

Tax Consequences of Victim Compensation Fund and Terror-Related Disability Payments

For individuals who sustained injuries, and for families who lost loved ones as a result of the September 11th terrorist attacks, there is some tax relief available.

In 2002, then-president George W. Bush signed into law the Victims of Terrorism Tax Relief Act of 2001. Despite the law, many people are simply unaware of the tax breaks available on disability payments associated with injuries from the terrorist attacks.

In April of 2014, U.S. Senator Kirsten Gillibrand notified constituents of an ongoing process to update vague tax guidelines — and to help ensure that victims and insurance companies are aware of the tax benefits that had been made available in 2002.

Benefits available and described in IRS publication 3920, “Tax Relief for Victims of Terrorist Attacks” include the following:

• September 11 and Zadroga Victim Compensation Fund award payments are not considered taxable income by the IRS.
• The disability payments of persons made ill or injured by a terrorist attack, including the attacks of September 11, 2001, are non-taxable.
• The estate of any person killed by a terrorist attack is due a tax refund of at least $10,000.

Unfortunately, we have discovered that some injured individuals and families have paid taxes on disability payments or failed to receive a tax refund for the estate of a deceased victim. As the Internal Revenue Service (IRS) works to update its guidelines, taxpayers (or their accountants) should consult IRS publication 3920 for further information on retroactive tax benefits available under this legislation.

Notes Senator Gillibrand, “Our 9/11 heroes who answered the call of duty deserve clear, unequivocal guidelines on the tax relief that they are entitled to.”

Please make sure that you take advantage of tax breaks created for you. If you have any questions about an injury or a compensation claim in New York City, please feel free to talk to an experienced 9/11 injury attorney from Barasch & McGarry.