Good News: "More than 133,000 vets may qualify for this tax refund windfall"

Dollars Tax refund.jpg
More than 133,000 vets may qualify for this tax refund windfall
From Army Times. By Karen Jowers.

"More than 133,000 veterans may qualify for a refund of federal taxes they paid on disability severance pay dating back to 1991 ― taxes that shouldn’t have been collected in the first place.

Within the next month, Defense Department officials will send notification letters to veterans that they may be eligible for the refund, said Army Lt. Col. David Dulaney, executive director of the Armed Forces Tax Council.

Eligible veterans will have a year after they receive the notice to file a claim for the refund.

These refunds, which are the result of a law passed in 2016, apply to veterans who received this pay dating back to Jan. 17, 1991, with taxes withheld, and who also qualified for disability from the Veterans Affairs Department.

The 2016 Combat Injured Veterans Tax Fairness Act went into effect in 2017. The law requires DoD to identify the veterans whose benefits were previously improperly taxed; and the notification letter will include information about the amount of disability severance payments that were improperly taxed, and instructions for filing an amended tax return to receive the refund.

Of the 300,000 veterans who received the disability severance payment, DoD has identified 133,000 who may qualify for refunds, Dulaney said.

Under federal law, any service member who suffers a combat-related injury and is separated from the military receives a one-time, lump-sum disability severance payment based on their rank and years of service. Although the payout was supposed to be tax-free, DoD routinely took taxes out of the severance pay, according to advocacy groups. The 2016 law mandated that DoD stop improperly taxing the pay.

The notification letters will provide information to veterans on how they can apply for the refund. Defense officials have been working with Internal Revenue Service officials to clarify the process, Dulaney said.

The amount of tax refund will vary by veteran, as the amount of the disability severance varies based on rank and years of service. But it’s worth the time to file the claim, Dulaney said."

This article details the great news that the DoD will be providing notification to all of those who had taxes improperly withheld from their disability severance payments.

The bad news? Veterans will have to apply for the refund to receive it. Still, the law and the notifcations are a good step to rectifying the erroneous withholding. The amounts could be substantial. Also, note that there is a one year period after notification to apply for the refund.
Jason Perry



Registered Member
In 2002, I was Medically Retired (03E). I received a severance pay and it was taxed at 28% almost $30,000 taken. Was not informed I could file to get this money back nor has DOD contacted me. In 2002, VA rated me 90% & in 2008 increased to 100%. Finally in 2013, I got Total & Permanent Disability. In 2017, I was awarded 80% for CRSC & received backpay. Now.... here's the kicker! DFAS took over $16,000 & CRSC took over $13,000 from this backpay, the total of the two was the amount of taxes taken out of my severance pay in 2002. They noted that I had paid back the VA the rest. I contacted DFAS & explained they took that money from me in 2002 & I never got it back, now they are taking it from me again. I was told they have to take this money "by law". I have reached out to my Congressman (liaison) & he contacted DFAS. Although he was a huge help, DFAS wasn't and I'm back to square one. Talk about being screwed twice!
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