Some veterans due tax refund
For some veterans, disability severance pay is not taxable nor subject to federal income tax withholding.
“On Dec. 16, 2016, the President of the United States signed into law the Combat-Injured Veterans Tax Fairness Act of 2016, which provides eligible veterans the right to seek a refund of taxes they may have paid on disability severance pay,” according to a release forwarded by Warren County Veterans Affairs Director Ed Burris.
In July, letters were sent to about 130,000 separated military members who had received disability severance pay as income. Federal tax withholding was applied in those cases. The letters were intended to let those separated members know that they were due some money.
Those letters were sent by the Internal Revenue Service (IRS) and the Defense Finance and Accounting Service (DFAS). IRS forwarded the letters because DFAS did not necessarily have current addresses for all of the separated military members.
There could be affected people who did not receive the letters if IRS did not have current mailing information, according to the release.
Veterans who meet one of the following conditions are eligible for a tax refund:
¯ Those who are receiving VA disability compensation or have received notifications from the VA approving such compensation; and
¯ Those who have a combat-related injury or illness as determined by military service at separation that — resulted directly from armed conflict; took place while engaged in extra-hazardous service; took place under conditions simulating war, including training exercises such as maneuvers; or was caused by an instrumentality of war.
Those who received, or should have received the letters have one year from the date of the letter to claim the tax refunds.
“As taxpayers can usually only claim tax refunds within three years from the due date of the return, this alternative time frame is especially important since some of the claims may be for refunds of taxes paid as far back as 1991,” according to the release.
Veterans who have records indicating how much disability severance pay they received may file a Form 1040X based on that amount.
The standard refund amounts, based on the year a veteran received his or her disability severance pay, are:
¯ $1,750 for tax years 1991 through 2005;
¯ $2,400 for tax years 2006 through 2010; and
¯ $3,200 for tax years 2011 through 2016.
“I’m not sure how many veterans it may apply to but even if it were only one, it’s worth sharing,” Burris said.
Veterans who are eligible but did not receive a letter may contact Burris at 728-3478.
Further details may be found at www.dfas.mil.