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Government Contract Employee income tax exempt?

smartie103
Level 1

I have a client that worked in Iraq for a government contractor. Worked in a hazard zone His pay should be tax exempt correct? And how do I enter so that income is not taxed?

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3 Comments 3
qbteachmt
Level 15

Just to review:

You don't have a Military Service member, and you don't even have a Civilian employee of the US Government. You have a Subcontractor of a Government Contractor or a payroll-based Employee of that Contractor.

Even for Military, they get pay, and you would be asking about the "allowances and differentials" or Additional pay that is for Hazard or Imminent Danger. The Employer would be responsible for identifying, submitting, and reporting that amount as falling under that specific provision.

Are you trying to make their regular pay tax free? Where did you see that provision?

 

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qbteachmt
Level 15

The closest thing I see to what you might be thing of is Foreign pay.

"Combat zone contract workers qualify for foreign earned income exclusion"

https://www.irs.gov/newsroom/new-law-makes-clear-combat-zone-contract-workers-qualify-for-foreign-ea...

 

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qbteachmt
Level 15

I found you an article that explains how the two provisions are different:

https://www.greenbacktaxservices.com/blog/combat-zone-workers-can-use-the-foreign-earned-income-excl...

 

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