Members of the Senate Finance Committee have come up with a bill that could make it easier for employers to provide extra pay for reservists called up for active duty.
Sen. Max Baucus, D-Mont., chairman of the committee, has joined with Sen. Charles Grassley, R-Iowa, the most senior Republican on the committee, to introduced the Defenders of Freedom Tax Relief Act.
The bill number was not available at press time.
One major provision would create a permanent provision to replace the temporary law that now permits soldiers to include non-taxable combat pay when figuring eligibility for the earned income tax credit.
Another provision would change the tax rules for employers that offer extra military leave pay for reservist employees who are called up for active duty.
The employees could treat the payments as wages and report them on Form W-2, rather than on Form 1099, officials say.