Payroll

Terror Victim Benefits are Not Taxable   

Under a new law called The Victims of Terrorism Tax Relief Act of 2001, certain death benefits that employers paid on behalf of victims of the September 11^th and the anthrax attacks will not be taxable to the recipients.  Many of the over 300 employers who lost employees in the attacks paid to the survivors of those employees special benefits that would normally be taxable. 

According to the Act, “Only the amount that exceeds the benefits that would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack is excludable. However, the exclusion does apply to incidental death benefits paid under a qualified retirement plan even if these amounts would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack.

You can view IRS Publication 3920, “Tax Relief for Victims of Terrorist Attacks” at http://www.irs.gov/pub/irs-pdf/p3920.pdf.

This column is intended only to provide information and does not constitute advice.  Please contact your attorney or other qualified professional for legal advice regarding your employment, benefits, and payroll issues.