Is Victim Compensation Taxable?

Thousands of victims in the United States who suffered severe losses from the attacks of September 11, 2001, and its aftermath have put in claims to receive a portion of the Victim’s Compensation Fund (VCF).

To date, many individuals have received substantial awards from the fund, but once receiving their VCF award, many wonder if their victim compensation settlements are taxable by the Internal Revenue Service (IRS), and how and if they should report this money on their tax returns.

Are you a 9/11 Victim? Get help from our experienced World Trade Center Victim Compensation Fund attorneys

The VCF claim process is a very complex one because of the detailed documentation required to prove eligibility. Missing just one step in the process could significantly delay a decision.

The Gregory Cannata & Associates law firm is dedicated to helping people file VCF claims. Call our law firm at 888-982-8428 to learn more about how we can help you determine your eligibility.

What is the September 11th Victim Compensation Fund?

The World Trade Center Victim Fund was originally created shortly after September 11. At that time, it was mostly for the victims of the 9/11 terrorist attacks and their families. Initially administered by a Special Master of the Department of Justice, it is essentially a fund for victim restitution.

The original fund ran out of money after a few years, but in 2010, Congress passed the James Zadroga 9/11 Health and Compensation Act. Often referred to as the “Zadroga Act,” (named for NYPD detective James Zadroga who had been exposed to toxins in lower Manhattan, later succumbing to illness contracted at Ground Zero), this act created a fund of 3 billion.

In 2015 the Zadroga Act was set to expire, but Congress re-funded the VCF with 4 billion and the fund was set to expire in 2020. However, in July 2018 the President signed the “Never Forget the Heroes: James Zadroga, Ray Pfeifer, and Luis Alvarez Permanent Authorization of the September 11th Victim Compensation Fund Act” into law.

This law is also known as the “VCF Permanent Authorization Act.” The VCF now has unlimited funding and has been extended until 2090.

Over the years the scope of the VCF has changed. In its current form, it is designed to include eligibility of financial assistance to the thousands of 9/11 victims who suffered severe losses, including lost wages.

For instance, money is awarded to people suffering cancers, death, or other non-cancerous medical conditions after being exposed to harmful toxins at Ground Zero, in lower Manhattan (south of Canal Street), the Staten Island Landfill, or certain piers in New York City where barge loading and debris removal took place.

Families of the people who died from events related to the 9/11 terrorist attacks are also eligible to register and apply for compensation..

Claimants did not have to be present at the World Trade Center on 9/11 to qualify for compensation.

Are VCF awards taxable income?

Victims who have been awarded a sum from the World Trade Center Victim Compensation Fund generally do not have to report their victim restitution as income on their federal income tax return as established by IRS tax law.

In 2003, the Treasury Department and IRS confirmed any payments issued to 9/11 victims suffering physical injury or death would be tax-free.

Recipients of a VCF award can elect to receive a lump-sum payment or periodic payments this was set forth under Revenue Ruling 2003-1115 (“Gross income; compensation for injuries or sickness; disaster relief payments”) and remains in effect today. A brief overview of the most common tax situations relating to the Victim’s Compensation Fund as outlined by the IRS Publication 3920 is as follows:

• Payments distributed by the September 11th Victim Compensation Fund to victims are excluded from being taxed as gross income.
• Social Security Disability payments received as a direct result of injuries or illness suffered from the events of 9/11 are not taxable (but other disability payments received or would have received in retirement are taxable, this is an important distinction).
• Payments to survivors of people who died as a result of the 9/11 terrorist attacks do not have to report these payments as gross income on their tax returns.
• A decedent’s estate does not have to claim as gross income any award funds that have been approved. The IRS has granted an exception for VCF settlements when it comes to reporting estate taxes on federal tax returns.
• Qualified disaster relief payments received as compensation from the events of 9/11 are not taxable.
• People who died from injuries or illnesses connected to the 9/11 attacks are forgiven federal income tax liabilities.

The IRS has also noted lump sum compensation is also generally tax-free. However, always consult with an accountant or tax attorney if receiving compensation for further information on this issue. Our law firm does not offer accounting advice.

It’s always a good idea to talk to a professional who is highly knowledgeable about the VCF fund and eligibility requirements, especially if special circumstances exist, such as bankruptcy, divorce, Medicare secondary payor liens, state-based obligations for child support or other domestic obligations, and other situations related to state law.

Our firm is fully familiar with the regulations of the VCF. 

The law firm of Gregory Cannata & Associates has been vigorously helping victims of September 11th register for claims and receive awards for their suffering since 2003.

How do I know if I’m eligible for a payout?

The lawyers at Gregory Cannata & Associates can help you navigate through the process. Filing an application to register in the World Trade Center Victim Fund is a complex.

First, the individual has to have suffered a qualifying condition to be eligible to obtain compensation from the VCF.  The criteria for eligibility are very specific and are based upon a complex chart established by the World Trade Center Health Program (WTCHP).

The WTCHP is tasked with certifying individuals with a qualifying diagnosis. This is a preliminary step.

People who qualify for WTCHP can be anyone, but many people who suffered toxic exposure are first responders, EMS, police, fire, construction workers, office workers, cab drivers, students, and residents.

WTCHP may also provide medical coverage to those who became ill due to circumstances related to the 9/11 attacks who don’t have a policy with an insurance company to cover their medical bills.

Hundreds of cancers, illnesses and injuries qualify, but the most common types include:

• Acute traumatic injury
• Aerodigestive disorders
• Cancer (more than 75 types)
• Mental health conditions
• Musculoskeletal disorder
• Other non-cancer illnesses and injuries
• Deaths resulting from injuries or illnesses related to September 11th

Most, but not every illness certified for treatment by the WTCHP is eligible for compensation from the VCF. Generally, the VCF does not compensate for mental health conditions.

Additionally, for claimants to be able to be eligible for the WTCHP as well as for compensation awards, they must be able to prove they were present in the specified locations for a window of time after September 11th. For compensation, this is between 9/11/01 and 5/30/02.

A VCF attorney can examine an individual’s situation and determine if their circumstances are within the currently established windows of time for different types of exposures. We work with all of our clients in obtaining the requisite proof needed. 

The timeliness of filing a claim cannot be overstated because there is a statute of limitations to registering with the VCF want to register to the VCF as soon as possible since there are strict time limits involved.

Currently, there is a one-time exception for claims filed before July 29, 2021. Once successfully registered, this stops the statute of limitations from running.

Gregory J. Cannata & Associates makes a point of registering its clients immediately upon being retained.

Contact our 9/11 Victims Compensation Fund lawyers for a free consultation

The experienced and compassionate personal injury attorneys at Gregory Cannata & Associates are committed to helping people suffering loss from 9/11 receive an award from compensation programs.

Our law firm has successfully obtained more than $300 million for our clients severely impacted by the tragedies associated with September 11th.

If you, or a family member, suffered injuries, illness, or death due to toxic exposures received at Ground Zero or one of the other specified New York City locations, including anywhere South of Canal Street, we encourage you to contact us at 888-WTC-VICTIM.

We understand money will never replace the loss of your health or someone you love, but we hope a VCF award will help ease your pain and burdens.

‍Contacting our law firm is free, consulting with our law firm is free. Our no win, no fee policy means we never charge our clients any  fees for legal services unless and until we recover compensation on their behalf.