Severance Pay Tax after PEB

T

Tonyf3098

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Registered Member
Hey all,

hoping someone can point me in the right direction. I have service connected hearing loss during a live fire exercise. I was planning on submitting an IRS Form 1040X for a tax refund on the severance pay. However, I am now noticing something I overlooked.

Per DA Form 199, Informal PEB Proceedings, 'THE BOARD FINDS THE SOLDIER IS PHYSICALLY UNFIT AND RECOMMENDS A RATING OF 0% AND THAT THE SOLDIER'S DISPOSITION BE SEPARATED WITH SEVERANCE PAY.'


Per SECTION V, #1 - The disability disposition is not based on disease or injury incurred in the line of duty in combat with an enemy of the United States and as a direct result of armed conflict or caused by an instrumentality of war and incurred in the line of duty during a period of war (5 USC 8332, 3502, and 6303).

& #4- The disability severance pay was not awarded for disability incurred in a combat zone or incurred while performing combat-related operations as designated by the Secretary of Defense (10 USC 1212).

The hearing loss incurred during a live fire exercise, an instrumentality of war. Is there a way to go about appealing this? Or is the DA FM 199 set in stone once complete? Thanks in advance.
 
Hello @Tonyf3098 ,

I suspect others will offer more significant info, but in my opinion, it is not just the determination shown DA 199 that would have to be changed. The DD 214 that was generated after the DA 199 would require correction as well.

CC:
@Provis
@chaplaincharlie

Ron
 
I suepect it can be corrected. But it could be a very long process. Contact the office that signed the form and see if they will correct the form. If not the the long process of a BCMR begins.
 
chaplaincharlie said:
I suepect it can be corrected. But it could be a very long process. Contact the office that signed the form and see if they will correct the form. If not the the long process of a BCMR begins.
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Tonyf3098 said:
Hey all,

hoping someone can point me in the right direction. I have service connected hearing loss during a live fire exercise. I was planning on submitting an IRS Form 1040X for a tax refund on the severance pay. However, I am now noticing something I overlooked.

Per DA Form 199, Informal PEB Proceedings, 'THE BOARD FINDS THE SOLDIER IS PHYSICALLY UNFIT AND RECOMMENDS A RATING OF 0% AND THAT THE SOLDIER'S DISPOSITION BE SEPARATED WITH SEVERANCE PAY.'


Per SECTION V, #1 - The disability disposition is not based on disease or injury incurred in the line of duty in combat with an enemy of the United States and as a direct result of armed conflict or caused by an instrumentality of war and incurred in the line of duty during a period of war (5 USC 8332, 3502, and 6303).

& #4- The disability severance pay was not awarded for disability incurred in a combat zone or incurred while performing combat-related operations as designated by the Secretary of Defense (10 USC 1212).

The hearing loss incurred during a live fire exercise, an instrumentality of war. Is there a way to go about appealing this? Or is the DA FM 199 set in stone once complete? Thanks in advance.
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Yep! If you don't catch this until after you are out it will need to go the BCMR route. Even a VA determination won't fix the issue. I would also contact a CPA to determine if submitting a BCMR application holds your place regarding the statue of limitations for IRS amendments and refunds. I do believe there is a time limit on how far back you can go when amending a tax return to receive a tax refund.
 
If you get rated by the VA for the same issue, you also shouldn't be taxed on the disability severance. This is what happened to me. I was told that once the tax is out they can't reverse it and you have to file for the money back in your tax return. I did that and received the additional severance back from the IRS.
 
robins said:
If you get rated by the VA for the same issue, you also shouldn't be taxed on the disability severance. This is what happened to me. I was told that once the tax is out they can't reverse it and you have to file for the money back in your tax return. I did that and received the additional severance back from the IRS.
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Do you have any info you can share about that process? I am in the same boat and need to file for my taxes back from my disability severance pay
 
If it's not counted as taxable income on your military W-2 then it will automatically come back because you're reported income on your tax return won't include your severance and so it will show you've overpaid. You can also reach out to DFAS so they recode it as non-taxable income which will make it easier. Here's a couple links that explain it. I actually used a tax professional that year because I didn't want to do it on my own and mess it up.


www.irs.gov

Filing amended returns for combat-injured disabled veterans | Internal Revenue Service

Frequently asked questions regarding filing amended returns for combat-injured disabled veterans
www.irs.gov www.irs.gov
 
robins said:
If it's not counted as taxable income on your military W-2 then it will automatically come back because you're reported income on your tax return won't include your severance and so it will show you've overpaid. You can also reach out to DFAS so they recode it as non-taxable income which will make it easier. Here's a couple links that explain it. I actually used a tax professional that year because I didn't want to do it on my own and mess it up.


www.irs.gov

Filing amended returns for combat-injured disabled veterans | Internal Revenue Service

Frequently asked questions regarding filing amended returns for combat-injured disabled veterans
www.irs.gov www.irs.gov
Click to expand...

So I received my disability severance pay last week and it was taxed ( should have received $140K, but got $107k).

However this information is not listed on my W2 from DFAS and I have my official VA letter stating I am 100% P&T.

How do I recoup this? Is it a 1040X from the IRS, or is it something through DFAS? For that matter do I need to not do anything since none of my severance money was mentioned on my W2?

Additionally, I do not have anything in writing from finance, DFAS, Air Force personnel command stating my severance pay amount. For clarification I was separated 24 Dec 22

very confused with all of this.
 
Beard61 said:
So I received my disability severance pay last week and it was taxed ( should have received $140K, but got $107k).

However this information is not listed on my W2 from DFAS and I have my official VA letter stating I am 100% P&T.

How do I recoup this? Is it a 1040X from the IRS, or is it something through DFAS? For that matter do I need to not do anything since none of my severance money was mentioned on my W2?

Additionally, I do not have anything in writing from finance, DFAS, Air Force personnel command stating my severance pay amount. For clarification I was separated 24 Dec 22

very confused with all of this.
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How long did it take to receive after your last day? I’m essentially in the same boat. 10 DOD 100 P&T. My lawyer sent me the forms for the taxable recoupment. I can send em over if you need em. Just signed last l week. Waiting on eas…
 
Thegwinch412 said:
How long did it take to receive after your last day? I’m essentially in the same boat. 10 DOD 100 P&T. My lawyer sent me the forms for the taxable recoupment. I can send em over if you need em. Just signed last l week. Waiting on eas…
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Hello @Thegwinch412

He mentioned:
a. He received his severance pay last week
b. He also mentioned he was separated 24 Dec 22

7 days December + 31 days in January + about 5 days in February = approximately 43 days

Ron
 
RonG said:
Hello @Thegwinch412

He mentioned:
a. He received his severance pay last week
b. He also mentioned he was separated 24 Dec 22

7 days December + 31 days in January + about 5 days in February = approximately 43 days

Ron
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Seems off. I was told within 30 days, then again this process was supposed to take 4 months lol. Thanks Ron.
 
Thegwinch412 said:
How long did it take to receive after your last day? I’m essentially in the same boat. 10 DOD 100 P&T. My lawyer sent me the forms for the taxable recoupment. I can send em over if you need em. Just signed last l week. Waiting on eas…
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Yes, I will take any forms that you can send my way. I will send you a message with my email.

Ron is correct, I was paid my severance money fairly close to 1 month post separation and am already receiving my VA compensation. Granted I called and stayed on top of both DFAS, my servicing finance office, and the VA to make sure they paid me. It might have taken a little longer due to the entire government becoming non existent for the holidays.
 
Beard61 said:
Yes, I will take any forms that you can send my way. I will send you a message with my email.

Ron is correct, I was paid my severance money fairly close to 1 month post separation and am already receiving my VA compensation. Granted I called and stayed on top of both DFAS, my servicing finance office, and the VA to make sure they paid me. It might have taken a little longer due to the entire government becoming non existent for the holidays.
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Did you get you severance pay tax back and if so, how?
 
Beard61 said:
That's what I am currently trying to figure out how to do
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There are so many differenct scenarios that it's hard to tell you exactly what to do but there's 3 main ways to get your money back:
  1. If you receive severance before the year end, you can reach out to DFAS and submit required paperwork
  2. If it's after year end, you can file in your return to get it back. You'll likely need the help of a tax professional or be willing to do the research to make sure you file it appropriately.
    • if it's recorded as income in your w-2 you will have to show in your return, that the severance shouldn't have been counted as income and then your total income on your return is reduced showing a tax overpayment and thus you get the taxed amount back.
  3. If it's more than a year ago, you have to file an amended return asking for a refund because you overstated your income on the previous return.


Here's all the links again to read through and figure out what scenario applies to you and how to go forward:




www.irs.gov

Filing amended returns for combat-injured disabled veterans | Internal Revenue Service

Frequently asked questions regarding filing amended returns for combat-injured disabled veterans
www.irs.gov www.irs.gov
 
Thegwinch412 said:
How long did it take to receive after your last day? I’m essentially in the same boat. 10 DOD 100 P&T. My lawyer sent me the forms for the taxable recoupment. I can send em over if you need em. Just signed last l week. Waiting on eas…
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Could you send me the forms also please. Im also trying to recoup my taxed sep pay. Email: [email protected]
Thanks!
 
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