Volunteer Firefighters’ Benefits Protected from Federal Taxation
by Neil Bomberg
Late last year, the Congress passed and the President signed into law the Mortgage Forgiveness Debt Relief Act of 2007. The law, which was drafted to provide people in foreclosure with tax relief, also included a number of smaller tax relief packages. One of those tax relief packages benefits volunteer firefighters and emergency medical technicians (EMTs).
Under the new law (P.L. 110-142, Section 5), the first $360 received by a volunteer firefighter or EMT from a state or local government is exempt from federal taxes. This is the case whether the payment comes in the form of a property tax benefit or a direct payment, as long as the benefit or payment is for services that the volunteer provided as a firefighter or EMT.
Under current law, any amount that a volunteer firefighter receives, whether in the form of a property tax benefit or payment must be reported on a W-2 Form as wages and is subject to taxation. Local governments are responsible for withholding on these “wages” and filing Form 941 with the Internal Revenue Service.
Under the new law, the first $360 of this benefit is exempt from taxes, but cities and towns that utilize volunteer firefighters and EMTs would still be responsible for reporting these wages and paying any withholding for benefits or payments in excess of $360 per year.
The law, which went into effect January 1, 2008, will cover property tax benefits and payments made to firefighters and EMTs in 2008, 2009 and 2010. No benefit will be seen until returns for the 2008 tax year are filed in early 2009.
The Internal Revenue Service has not come out with any guidance on this law, but is expected to do so later this year. For cities and towns with tax related questions because of this change, the IRS recommends contacting a local Federal, State and Local Governments (FSLG) Office for guidance. Contact information by state can be found at www.irs.gov/govt/fslg/article/0,,id=96060,00.html.
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