Victims, survivors and some dependents of those killed during the Sept. 11, 2001 attack on the World Trade Center, the Pentagon and United Airlines Flight 93; the Oklahoma City bombing in 1995; and the 2001 anthrax terrorist attacks may be eligible to claim certain types of tax relief. To benefit, taxpayers must file claims for these benefits using the guidelines and time frames set by law. A reminder for employers is also included below.
Disability Payments to Survivors
Disability payments, including Social Security Disability Insurance (SSDI) payments aren’t taxable if they’re for injuries incurred as a direct result of any terrorist attack (including the Oklahoma City, September 11 or 2001 anthrax attacks) against the United States or its allies. However, you must include in your income any disability payments you received or would’ve received in retirement if you hadn’t become disabled as a result of a terrorist attack.
Tax Forgiveness for People who Died
Federal income tax liabilities of people who died from wounds or injuries related to the Oklahoma City or September 11 attacks are forgiven. Federal income tax liabilities of people who died from an illness related to the 2001 anthrax attacks are also forgiven. Income tax is forgiven going back to 2000 (1994 for victims of the Oklahoma City attack) whether a person was killed in an attack, died later as a result of an attack or by participating in rescue or recovery operations.
Minimum Amount of Relief
A minimum of $10,000 in relief is provided if the deceased person’s total tax forgiveness is less than $10,000. To find out which years are eligible for a credit or refund, see the enhanced Publication 3920, Tax Relief for Victims of Terrorist Attacks (September 2014).
On a joint return, only the deceased person’s portion of tax liability is eligible for forgiveness. If both spouses are eligible for tax forgiveness, the amount is determined separately for each spouse.
Forms You May Need to File
To claim these benefits, submit one or more of the following forms and use the worksheets provided in Publication 3920:
you need to claim tax forgiveness for a person who died or request a refund of taxes withheld from disability payments (and a return is required but hasn’t yet been filed)
you need to claim tax forgiveness for a person who died or request a refund of taxes withheld from disability payments (and a return is required and has already been filed)
file Form 1040X for each year you are claiming tax relief and submit to the IRS
you need to stop the withholding of income taxes from payments reported on Form W-2
complete Form W-4 and submit to your employer
you need to stop the withholding of income taxes from pension or annuity payments reported on Form 1099-R
complete Form W-4P and submit to the pension company or agency
you need to stop the withholding of income taxes from Social Security Disability Insurance (SSDI) payments
complete Form W-4V and submit to your local Social Security Administration office
For more information see Publication 3920.
If you have employees who were victims of the September 11, 2001 attacks, the 1995 Oklahoma City attack or the 2001 anthrax terrorist attacks, they may be eligible for certain tax relief benefits.
Benefits could include:
- Tax forgiveness for victims who died
- Certain disability benefits received for injuries sustained in 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
When reporting taxable payments to the IRS and your employees, do not report as taxable any payments or benefits that are excluded from tax under these provisions. Also, never withhold income taxes from amounts totally excluded from tax. If you do, your employees who are eligible survivors may use the following forms to stop withholding.
- Form W-4, Employee’s Withholding Allowance, to stop withholding of income taxes from payments reported on Form W-2.
- Form W-4P, Withholding Certificate for Pension or Annuity Payments, to stop withholding of taxes reported on Form 1099R.
For additional information to help your employees, please refer to the individuals content above and Publication 3920.
For questions about tax forgiveness, payments to survivors or disability payments related to a terrorist attack call our Special Services Hotline toll-free at 866-562-5227. The hotline is available Monday through Friday from 7 a.m. – 7 p.m. local time.