All income is taxable for federal income tax purposes, unless specifically exempted by law. I couldn't find any such exemption for hazard pay, outside of combat pay for members of the military. You can review IRS publication 525 which deals with taxable and non-taxable income to see if there is any exemption for your hazard pay. Also, you should ask your wife's employer for the IRS code which deals with the hazard pay issue.
In any case, you will need to report the income on your form 1099-MISC or the IRS will assume you earned it and did not report it.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
