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

Comments

I wish I had mine, but went through a crazy divorced and things got thrown away or take. So I guess I have to settle for the stanndard amount. Good luck I hope you hear something soon. When I talked to the lady at IRS she said 16 weeks is average for amended returns but that these are priority so should be sooner.
When I asked her how long I should wait for the check before I call back she explained that things get messy if you originally filed joint with a spouse because they have to make sure the check didn't go to the spouse. So, if you did file a joint return when the taxes were withheld originally but now you are divorced, I have no idea if that would complicate things and make the process longer.
 
Hello,
I found this forum to be very helpful so I decided to add my experience. I was service connected 15 Feb 03, with 20% from USA (ARMY). I received my severance of over 32K and was taxed 10K, filed in 03 head of household (HH) with 1 dep. In college. My taxable income before the severance pay is in question from that year. I became a student for 6 years and immediately after discharging from USA, the same year I worked as a contractor in Kuwait tax free.

My point is this simple advice and support, due diligence is necessary on this one! Don't become frustrated with the red tape. Regain your military mindset and research skills. The IRS and DFAS made this huge error together. How can you make a mistake on the law of 1991. Anyway, if they can make this big mistake then they can make many minor ones. For instance, they do not keep your information past 7 years but before they can tell you anything they must ask you questions to verify who you are and this is how they can research your tax history and printout the print screen information of that year in question. I had mine mailed to me from the helpful government worker who maybe a veteran or a family member of a vet.

I researched the historical overpayment tax rates from 2002 to present date by quarters and found very helpful information. The interest rates very however it us promising depending on each individual, 15 years x withholding amount x interest. Yes, I have tried several variants of my situation and approximately I could receive anywhere from 10k to 13k in interest alone.

Finally, after reading through the forum I forecast for receiving my return is correct I filed 14 Sep 18 and I confirmed receipt of my form via telephone today of 21 Sep 18. My check should be here 16 Nov 18 with at least 13K. Now, I too was told verbally and reading the law. I will not file my taxes because I am currently permanent and totally disabled and my disability is not earned income it is disability pay for my service injuries. Obligation to file starts at 10K for indengent people like myself. If you don't want the extra cash, fast by the numbers is best, less hassle and simple to do. It also earns interest. THANK YOU FOR YOUR SERVICE, ARMY ALL THE WAY WHOOOA!

USA, VET,M.P.A.
 
I filed mine on 21 July. I have been in contact with the IRS more times than i can count. I have not received my refund yet. They (the IRS) put in a request on 25 Sept, and told me that I should here something in 30 days.. I hope I have my refund before 25 Oct however, im anticipating that I will be calling again to inquire.
 
I had to send my paperwork in twice they said they recieved it back in july something told me to track it so i called to check in and found that in october they didnt know where my paperwork was and thet i needed to send it in the second time. Still havent recieved a check yet.
 
The government screws you over no matter what. In order to get your full amount you must have that years tax return to fill out the 1040x completely. Most people don't have their returns so are forced to get the standard deduction which is significantly less than what you should be receiving. Irs dont keep tax returns past 7 years like myself I requested a tax transcript but couldn't get since it was for 2008. Veterans get screwed again what's new....so yo save you the headache just request the standard amount cause that is what you will end up getting after months of dealing with the IRS yo get your documents only to discover you can't.
You can request a transcript of your return from the IRS. It’s time consuming, but could be worth it. I got my refund letter 2 days ago, AND they add interest. I got out in 2002 and they kept over $17k. That letter made the extra work waaaaaay worth the trouble, since the “standard refund” is NOTHING compared to my actual refund. They’re definitely not doing it for convenience, they’re trying to save millions. When Congress initially enacted this the estimate of those affected was around 1300 (avg of $5000), when they did the numbers it jumped to over 130,000. Good luck! I’m supposed to get mine within 2-3 weeks, so I’m hoping to have a VERY MERRY CHRISTMAS!
 
Hello,
I found this forum to be very helpful so I decided to add my experience. I was service connected 15 Feb 03, with 20% from USA (ARMY). I received my severance of over 32K and was taxed 10K, filed in 03 head of household (HH) with 1 dep. In college. My taxable income before the severance pay is in question from that year. I became a student for 6 years and immediately after discharging from USA, the same year I worked as a contractor in Kuwait tax free.

My point is this simple advice and support, due diligence is necessary on this one! Don't become frustrated with the red tape. Regain your military mindset and research skills. The IRS and DFAS made this huge error together. How can you make a mistake on the law of 1991. Anyway, if they can make this big mistake then they can make many minor ones. For instance, they do not keep your information past 7 years but before they can tell you anything they must ask you questions to verify who you are and this is how they can research your tax history and printout the print screen information of that year in question. I had mine mailed to me from the helpful government worker who maybe a veteran or a family member of a vet.

I researched the historical overpayment tax rates from 2002 to present date by quarters and found very helpful information. The interest rates very however it us promising depending on each individual, 15 years x withholding amount x interest. Yes, I have tried several variants of my situation and approximately I could receive anywhere from 10k to 13k in interest alone.

Finally, after reading through the forum I forecast for receiving my return is correct I filed 14 Sep 18 and I confirmed receipt of my form via telephone today of 21 Sep 18. My check should be here 16 Nov 18 with at least 13K. Now, I too was told verbally and reading the law. I will not file my taxes because I am currently permanent and totally disabled and my disability is not earned income it is disability pay for my service injuries. Obligation to file starts at 10K for indengent people like myself. If you don't want the extra cash, fast by the numbers is best, less hassle and simple to do. It also earns interest. THANK YOU FOR YOUR SERVICE, ARMY ALL THE WAY WHOOOA!

USA, VET,M.P.A.
Congrats!!! I’m waiting for mine! What did the interest look like, if you don’t mind me asking. Mine was from 2002...
@Mark
 
Did you file it? I received the same letter and filed my 1040X. My question is if anyone has actually received their refund yet and how long it took after filing to receive it?
My application return without action. I submitted a copy of my tax from 2002 and copy of DFAS documents. The form 1040X. But, they wanted me to apply the standard vs to the actual amount to speed the processing. I was informed by a VA employees that they are processing of paying back the severance pay.

Edna
 
I submitted my application but return without action and they advise to apply St Clear to received standard claim. I was taxed over 10K and I wanted it back with interest. I have copy of my tax return in 2002 and they asking the original. They also asking the initial VA result which I was rated 50% and granted 100% in 2017. Any guidance on how and what to submit is greatly appreciated. Thanks

Edna
 
I submitted my application but return without action and they advise to apply St Clear to received standard claim. I was taxed over 10K and I wanted it back with interest. I have copy of my tax return in 2002 and they asking the original. They also asking the initial VA result which I was rated 50% and granted 100% in 2017. Any guidance on how and what to submit is greatly appreciated. Thanks

Edna
1. The original of any tax return would have been sent to the IRS. Recommend you send a copy of your retained copy of the return along with supporting documents.

2. They are asking for copies of your VA awards at 50% and 100% which should have been received via mail. You did not mention whether you have copies. If you have them, then they should be submitted. If you do not, I would request copies from the VA regional office. Perhaps a Veterans Service Organization could assist.

3. St. Clair Decision <—- LINK
Excerpt:
“Members who do not submit the required documentation before the end of the tax year (after the end of the December work month of each year) will need to direct their inquiry to their local Internal Revenue Service (IRS) office. The member will then need to provide to the IRS the disability information (copies of their VA Award Letter and the PEB findings) at the time he/she files their Federal tax return. The IRS will refund the Federal tax as appropriate. Please be advised that at least one of the existing medical conditions must exactly match.”

4. Recommend reading the multiple posts by MackValdez in this thread. He outlined his successful application.


Ron
 
1. The original of any tax return would have been sent to the IRS. Recommend you send a copy of your retained copy of the return along with supporting documents.

2. They are asking for copies of your VA awards at 50% and 100% which should have been received via mail. You did not mention whether you have copies. If you have them, then they should be submitted. If you do not, I would request copies from the VA regional office. Perhaps a Veterans Service Organization could assist.

3. St. Clair Decision <—- LINK
Excerpt:
“Members who do not submit the required documentation before the end of the tax year (after the end of the December work month of each year) will need to direct their inquiry to their local Internal Revenue Service (IRS) office. The member will then need to provide to the IRS the disability information (copies of their VA Award Letter and the PEB findings) at the time he/she files their Federal tax return. The IRS will refund the Federal tax as appropriate. Please be advised that at least one of the existing medical conditions must exactly match.”

4. Recommend reading the multiple posts by MackValdez in this thread. He outlined his successful application.


Ron
I have submitted all of these things when I submitted my ammended taxes in November along with the st. Clair decision letter. Here it is May and still they are talking about they need more time they have even verified all my documents along with it when I called stating they have it all but haven't been worked
 
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