Volunteer Firefighter Incentive income

[Josh290]

Some volunteer firefighters in PA receive small monetary incentives for service.  How and where do you report this income considering the recent passage of the Volunteer Responder Incentive Protection Act (VRIPA) which allows the first $600 of volunteer firefighter incentives to be non-taxable on federal income tax?

[GiseleD · Accepted solution]

According to Congress.gov, this is not effective for the 2019 tax year. It will impact the 2020 tax year, which you will file in 2021. Below is an excerpt from the above webpage (scroll all the way to the bottom):

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply with respect to taxable years beginning after December 31, 2019.

Regarding reporting this for 2019, did you receive a 1099 for these payments? Please identify the tax form you received, if any, so that we may advise the correct way to report it. 

[Bryan J]

Now it is the 2020 tax year.  Is there an answer to this question?  I was about to complete 1099's for some of our volunteers that received a yearly stipend over $600 but I wanted to see if there was an answer to this question so I know what to tell them about how to report it or if I even need to include it on the 1099 or maybe just the amount over $600?

Thanks for any insight you can provide!

[Irene2805]

Since the incentive is nontaxable (up to $600) on the federal return, do not include the first $600 on your tax return.

@BryanJ  Include the entire amount on the 1099s issued and let the individual firefighters make the necessary adjustments on their tax returns.

[Bryan J]

Thank you for the quick reply!  That helps a lot!  As a related question, can you tell me whether I should use the new 1099NEC form or continue using the 1099MISC?  I have used the MISC in years past but I put the amount in box 7. Now that it has changed, I'm not sure if I should use box 1 of the NEC form or keep using MISC and put the amount in box 3 instead of 7.  These are 100% volunteer firefighters who receive a small incentive payment once a year.  Some of these payments exceed $600, but most do not.  I only complete the 1099 for those that are $600+.   

[Irene2805]

The IRS says that if the incentive payment is considered "payment for services" it should be reported on Form 1099-NEC.  If the payment is not considered payment for services and is considered more like an award, enter the payment in Box 3 of form 1099-MISC.

Since they are volunteers--not really paid for their service--I recommend 1099-MISC Box 3.

Keep in mind that if the payment is less than $600, neither form has to be prepared.

@Bryan J

[Bryan J]

Thank you for the advice!

[lynnscott132]

What if the payments received were based on calls made or meetings attended for the volunteer?  I am a volunteer firefighter, as is the entire department, and we received incentive pay based on calls responded to.  Since it is not just a one time payment, would it still be considered an award?  Or would I have to report as payment for services?  Thanks in advance.

[Cynthiad66]

Firefighters

This discussion addresses some of the common questions we receive from firefighters and their employing organizations.

Compensation

Generally, tax laws apply to firefighters in the same manner as for other types of workers. It does not matter whether firefighters are termed “volunteers”, are considered employees, or are identified by any other name, if the work they do is subject to the will and control of the payer, under the common-law rules, they are employees for Federal tax purposes. The determination as to whether workers are common-law employees or independent contractors is made applying the same standards used for other workers.

Similarly, it does not matter whether they are paid on a “call” basis, monthly, hourly, etc.; or whether the worker is full-time or part-time. These payments are wages that should be reported on Form W-2, subject to withholding for Federal income tax, social security, and Medicare purposes. Employers are responsible for withholding on these wages and filing Form 941.

If a worker is a common-law employee, any amounts received that are not exempt under a special provision, are reported on Form W-2 as wages. It does not matter what the payments are called.

Firefighters Compensation

[Kurt1319]

I received a stipend from our fire district in 2020 for services as a volunteer firefighter. I also received a W-2 reflecting the amount of the payment I received. Since the amount on the W-2 reflects the entire amount I received, which is in excess of $600, how do I make the necessary adjustment to my return on the entry(ies) in Turbo Tax to receive the benefit of the VRIPA?

[DianeW777]

Volunteer Responder Incentive Protection Act (VRIPA) exempts nominal volunteer recruitment and retention incentives from being subject to federal income tax and reporting requirements for the 2020 tax year. Specifically, H.R. 1865 exempts property tax benefits and up to $600 per year in other incentives, such as stipends, that volunteer fire and EMS personnel receive as a reward for their service.

When a volunteer emergency responder incurs expenses in connection with his performance as an emergency responder, he or she can deduct those expenses as a charitable contribution to the extent that the expenses exceed the amount of any qualified payment excluded from gross income and to the extent that the volunteer emergency response organization is a qualified charity under section 170.

The following is a suggested way to remove the $600, if you believe it is included in your W-2.  The maximum allowable exclusion is $600 as noted above.

1. Sign into your TurboTax account 
2. Under Wages and Income > Scroll to Less Common Income > Select Miscellaneous Income, 1099-A, 1099-C
3. Start/Revisit or Update  > Select Other Reportable Income > Start/Revisit or Update
4. Enter your description and amount as shown below (use a minus sign in front of the number)

[Kurt1319]

THANK YOU so much for your prompt reply!!

[abbottl]

This creates an error when I attempt to e-file my federal return, saying a negative number can't be in that field of the calculation worksheet.  None of the previous error checks found it and I can't override it to continue to e-file.  Is there a work around?

[ThomasM125]

@abbottl You will need to mail your tax return in if you have the negative income figure listed on it. If you account for it be reducing the income reported on the 1099 form, the IRS will probably adjust your tax later on and send you an invoice for the tax due.

[lynnscott132]

I believe the deduction on incentive income is up to $600. So you shouldn’t have a negative amount. If your incentive income was $400 then you would report $0. That is how I understand it.