Cities and Towns Should Not Assess and Withhold State or Federal Income Taxes On A Police Officer's Injured on Duty Pay
A police officer's compensation for "injured on duty pay" paid them pursuant to Massachusetts General Laws Chapter 41, Section 111F is exempt from both State and Federal taxes.
Compensation for personal injuries and sickness is excludable for Federal Income tax purposes from gross income under §104(a)(1) of the Internal Revenue Code if it is recieved under "any statute in the nature of a workmen*s compensation act which provides compensation to employees for personal injuries or sickness incurred in the course of employment." Massachusetts General Laws Chapter 41, Section 111F is such a statute in the nature of a workemen's compensation law. It is this statute that injured officers receive their base wages while out injured on duty. In addition, §104(a)(2) of the Internal Revenue Code excludes from gross income damages received, whether by suit or agreement, on account of personal injuries or sickness. The exclusion embraces compensation for lost wages if occasioned by personal injury or sickness, despite the usual principle that recoveries are taxable if they are compensated for amounts that would have been taxable if received in due course.
Similar to the Federal law, under Massachusetts state law, compensation paid to injured police officers is not considered wages for purposes of taxation. Massachusetts General Laws Chapter 62B, §1 defines wages as those that are taxable and subject to federal withholding. Since Section 111F injury on duty payments are not subject to federal taxation as described above under Section 104(a)(2) of the Internal Revenue Code, they are also exempt from state taxation. This has been the position of the Massachusetts Department of Revenue.
We occasionally get telephone calls from injured officers where their City of Town is taking taxes out of their injury on duty pay. This is wrong and the City or Town should be immediately notified of the laws covered in this article. Injured officers who are out of work injured on duty suffer enough already by not receiving lost overtime and detail pay while they are out injured on duty. Active police officers should consider private disability insurance policies to offset the loss of overtime and detail pay while they are out injured on duty.