Combat Injured Tax Fairness Act Question

octoberfest

PEB Forum Regular Member
PEB Forum Veteran
So I received my letter informing me that my severance pay in 2004 should not have been taxed under the Combat Injured Tax Fairness Act. They listed my severance pay amount, $42,500 and change, and listed the instructions on what I needed to do.

Like many others I do not have my 2004 tax return. I know how much money I made that year and how much was taken out in taxes for that entire year, however, I do not have any information on how much that actual severance pay was taxed. They have instructions on there that state if you do not have your tax returns you can use a standard deduction of $1750 (for that time period). I know I had close to $7000 in taxes taken out, because I remember how shocked I was haha. Anyway, if I don't have my taxes and I used that deduction instead, will I be losing my tail on this? Is it worth me trying to contact the IRS and wait several months in order to get the exact numbers or should I just move forward with this?
 
You can request your past tax return from the IRS.
 
Link
 
I had to request an Account Transcript for mine since they did not have anything beyond 10 years for me. It took some time to get it especially with the shutdown but it did eventually come. I was out in 2005. So my situation might be close to yours in that regard.
 
Use your tax transcript and file an amended return (1040x) for that year, once you receive it. Well worth waiting, especially when I look at your numbers. They pay interest (which will again be taxable as interest income, but it was extra money anyway). My effective date was 2002, my severance was a little more than yours and I received back the original amount withheld and the interest, which was more than the actual amount withheld. Long story short I got back almost half of what my original severance was back in 2002. Best of luck!
 
Good evening Cassdw70, how did you go about completing the 1040X? I received my account transcript from the IRS a few days ago (2006 return), but I have no idea how to completing this form. I’ve been through numerous sites looking for assistance, but I’m coming up blank. I had nearly $9K taken out in taxes and don’t want to just claim the standard amount of $2,400 if I’m entitled to more as my family can definitely use it. Thanks in advance for any assistance!!!
 
Good evening Cassdw70, how did you go about completing the 1040X? I received my account transcript from the IRS a few days ago (2006 return), but I have no idea how to completing this form. I’ve been through numerous sites looking for assistance, but I’m coming up blank. I had nearly $9K taken out in taxes and don’t want to just claim the standard amount of $2,400 if I’m entitled to more as my family can definitely use it. Thanks in advance for any assistance!!!
Instructions for completing IRS Form 1040X

This LINK <----

When you file for your tax overpayment attributable to disability severance payments, write either “Veteran Disability Severance” or “St. Clair Claim” across the top of the front page of Form 1040X.
St. Clair refers to refers to the 1991 federal court decision that disability severance pay received for personal injury resulting from active service in the armed forces is not taxable income. St. Clair often is referenced in letters issued by DoD to those whose payments were erroneously taxed.

If you have questions about claiming a tax refund for your disability severance payment, you can call the IRS toll free at (833) 558-5245 ext. 378 between 7 a.m. and 7 p.m. (Alaska and Hawaii follow Pacific time).


Ron
Not a Tax Professional
 
Instructions for completing IRS Form 1040X

This LINK <----

When you file for your tax overpayment attributable to disability severance payments, write either “Veteran Disability Severance” or “St. Clair Claim” across the top of the front page of Form 1040X.
St. Clair refers to refers to the 1991 federal court decision that disability severance pay received for personal injury resulting from active service in the armed forces is not taxable income. St. Clair often is referenced in letters issued by DoD to those whose payments were erroneously taxed.

If you have questions about claiming a tax refund for your disability severance payment, you can call the IRS toll free at (833) 558-5245 ext. 378 between 7 a.m. and 7 p.m. (Alaska and Hawaii follow Pacific time).


Ron
Not a Tax Professional
Thanks, I’ll have to just call them then since I’m at a loss trying to figure out how to fill out the 1040X.
 
Thanks, I’ll have to just call them then since I’m at a loss trying to figure out how to fill out the 1040X.
I understand. I have prepared my son's tax returns for more than 20 years. Perhaps, someone in your community can assist you without charge.

The line by line instructions begin on page 11 of the cited reference (see above).

To some, it is simple. On the other hand, someone like me cannot repair anything unless the process involves a hammer.

Ron
 
Good evening Cassdw70, how did you go about completing the 1040X? I received my account transcript from the IRS a few days ago (2006 return), but I have no idea how to completing this form. I’ve been through numerous sites looking for assistance, but I’m coming up blank. I had nearly $9K taken out in taxes and don’t want to just claim the standard amount of $2,400 if I’m entitled to more as my family can definitely use it. Thanks in advance for any assistance!!!
I know it's been awhile since you posted this, but here's what I did: I knew I was single the year I got out, so that was easy (single, no dependents, etc.), I wasn't 100% on my college payments or credits, so I left that off any entitlements or exemptions (I kind of figured they'd either fix any mistake I made or they couldn't verify since they couldn't even find my records for the longest time and I only received a transcript with the most basic of information on it). I used my DD214 if I remember correctly to account for my income and I had some unemployment that year, but it was on the transcript. I just used their calculations line by line and came up and sent it in along with a copy of the DD214. My original amount withheld was around $15k. When I got the check it was twice that (you'll pay taxes on the interests, so don't spend it all before you file taxes :) ). Good luck! I got the letter in July, got my transcripts in September, filed in September/early October and got my check before Christmas last year.
 
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