TAX REFUND on Military Retirement

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brianmatt31

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Greetings, I received this information from a IDES contact POC at Fort Knox. If you qualify it looks to be pretty cool to get taxes back but if you qualify you'll have to file for this annually with your DD214 and VA disability % memo. This is a 5 year rule to this and looks like we can only request the taxes from 2014 and on.



Please see attached. This is legal but most retirees are not aware of this tax refund from military retirement taxes you paid to the IRS. Please read attached and also inquire with your tax person and file. Pass it on as well. Please see and Read Publication 525, pages 17 and 18. Also the note from a tax place in Columbus GA who files these for Veterans who qualify.
 

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  • 1040X Approval from the IRS (3) (1).pdf
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  • p525.pdf
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  • Please take the time to read about Publication 525-taxes.docx
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  • Refunds form Military Retirement Tax (4) (1).pdf
    609.8 KB · Views: 39
Taxes.

There is much to say about the subject presented above and not enough time to address each possible scenario.

1. Example A: SFC Doe Retired three years ago and received his full retired pay (regular, 20 AD) each month.
--Doe files a VA claim for a disability and it is approved @80% retroactive to the first day in a retired status.
--Since Doe is rated at 50% or more he is eligible for CRDP
--The VA will begin paying real time VA comp and the DFAS will begin CRDP, which allows concurrent receipt
--The DFAS will perform an audit and return the audit to the VA for payment of retro VA compensation
--The DFAS will recharacterize the previously paid retired pay as CRDP; that allows the retro pay of VA comp
--The DFAS does not owe retro CRDP due to the full receipt of retired pay for the retro period--which is now considered CRDP (note: CRDP is retired pay, restored)
--Since CRDP is taxable, there is no adjustment needed for taxes

2. Example B:
1. Example A: SFC Smith Retired three years ago and received his full retired pay (regular, 20 AD) each month.
--Smith files a VA claim for a disability and it is approved @40% retroactive to the first day in a retired status.
--Since Smith is rated below 50% so he is NOT eligible for CRDP
--The VA will begin paying real time VA comp and the DFAS audit his pay
--The DFAS audit will show that Smith did not waive retired pay for the retro period, so he is not eligible for retro VA comp that is equal to or less than his retired pay. In many cases, there is no retro VA comp because of this.
--The result is Smith had taxable income for the retro period, that either became partially or totally non-taxable because the VA comp that would have been paid in real time for the retro period would have reduced his taxable income.
--Smith can file amended tax returns for the retro period...a 1040 X is required for each separate year.

Note: There are many different scenarios possible. Recommend you see a tax professional (not the generic tax season pop-ups...sorry, opinion here) if you feel you qualify to amend returns Although I have worked in finance and accounting most of my life, I am not a tax professional. I have however, filed my own successful 1040 X returns under a couple of different circumstances.

---

Here is some additional information pertaining to retro CRSC that I put together a couple of years ago (I have not recently checked the validity of the links):

Update 5 October 2017:

For Amended Tax Returns Applicable to Prior Years to Which CRSC was Made Retroactive

Recommend you file a paper 1040X form and include such items as:
--copy of original return and associated documents
--copy of your approved CRSC application
--copy of most recent VA award documents
--your computation of how your taxes should be reduced
--a cover letter that explains the purpose of the amended return
--cite the applicable IRS rule/law for the modified return
Note: At the time of this post amended returns of this nature cannot be submitted electronically

https://www.irs.gov/individuals/militar ... r-veterans

-------

Amended Tax Returns, Retroactive CRSC, Public Law 95–479, Section 301

Additional and important information is at https://www.irs.gov/irm/part21/irm_21-006-006r

and

Amended Tax Returns, Retroactive CRSC, Public Law 95–479, Section 301

Additional and important information is at https://www.irs.gov/irm/part21/irm_21-006-006r
and
https://www.irs.gov/irm/part21/irm_21-0 ... 6514151168

-----
Ron
 
Last edited:
On a similar note, your disability severance pay is supposed to be tax-free. However, due to different separation orders-writing processes across the services, many people end up getting 25% taken out of their checks by the IRS.

This is a known issue with a simple fix. You just apply through DFAS, here: https://www.dfas.mil/debtandclaims/submitclaim.html (bottom of the page). You have to apply in the same calendar year that you discharge, or else you have to go through the IRS and it's a more cumbersome process.
 
RonG said:
Taxes.

There is much to say about the subject presented above and not enough time to address each possible scenario.

1. Example A: SFC Doe Retired three years ago and received his full retired pay (regular, 20 AD) each month.
--Doe files a VA claim for a disability and it is approved @80% retroactive to the first day in a retired status.
--Since Doe is rated at 50% or more he is eligible for CRDP
--The VA will begin paying real time VA comp and the DFAS will begin CRDP, which allows concurrent receipt
--The DFAS will perform an audit and return the audit to the VA for payment of retro VA compensation
--The DFAS will recharacterize the previously paid retired pay as CRDP; that allows the retro pay of VA comp
--The DFAS does not owe retro CRDP due to the full receipt of retired pay for the retro period--which is now considered CRDP (note: CRDP is retired pay, restored)
--Since CRDP is taxable, there is no adjustment needed for taxes

2. Example B:
1. Example A: SFC Smith Retired three years ago and received his full retired pay (regular, 20 AD) each month.
--Smith files a VA claim for a disability and it is approved @40% retroactive to the first day in a retired status.
--Since Smith is rated below 50% so he is NOT eligible for CRDP
--The VA will begin paying real time VA comp and the DFAS audit his pay
--The DFAS audit will show that Smith did not waive retired pay for the retro period, so he is not eligible for retro VA comp that is equal to or less than his retired pay. In many cases, there is no retro VA comp because of this.
--The result is Smith had taxable income for the retro period, that either became partially or totally non-taxable because the VA comp that would have been paid in real time for the retro period would have reduced his taxable income.
--Smith can file amended tax returns for the retro period...a 1040 X is required for each separate year.

Note: There are many different scenarios possible. Recommend you see a tax professional (not the generic tax season pop-ups...sorry, opinion here) if you feel you qualify to amend returns Although I have worked in finance and accounting most of my life, I am not a tax professional. I have however, filed my own successful 1040 X returns under a couple of different circumstances.

---

Here is some additional information pertaining to retro CRSC that I put together a couple of years ago (I have not recently checked the validity of the links):

Update 5 October 2017:

For Amended Tax Returns Applicable to Prior Years to Which CRSC was Made Retroactive

Recommend you file a paper 1040X form and include such items as:
--copy of original return and associated documents
--copy of your approved CRSC application
--copy of most recent VA award documents
--your computation of how your taxes should be reduced
--a cover letter that explains the purpose of the amended return
--cite the applicable IRS rule/law for the modified return
Note: At the time of this post amended returns of this nature cannot be submitted electronically

https://www.irs.gov/individuals/militar ... r-veterans

-------

Amended Tax Returns, Retroactive CRSC, Public Law 95–479, Section 301

Additional and important information is at https://www.irs.gov/irm/part21/irm_21-006-006r

and

Amended Tax Returns, Retroactive CRSC, Public Law 95–479, Section 301

Additional and important information is at https://www.irs.gov/irm/part21/irm_21-006-006r
and
https://www.irs.gov/irm/part21/irm_21-0 ... 6514151168

-----
Ron
Click to expand...
If you meet example A above, then no Tax Return from the IRS:(
 
hammer said:
If you meet example A above, then no Tax Return from the IRS:(
Click to expand...

If you mean there is no need for a 1040X for example at 1A; that is correct.
If you are indicating that the IRS is not going to refund previously paid taxes in scenario 1A above, that is also correct.

My remarks are related to Item 1A and:
"--The DFAS will recharacterize the previously paid retired pay as CRDP; that allows the retro pay of VA comp
--The DFAS does not owe retro CRDP due to the full receipt of retired pay for the retro period--which is now considered CRDP (note: CRDP is retired pay, restored)
--Since CRDP is taxable, there is no adjustment needed for taxes "

Ron
 
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