Severance Pay tax info

Jamesc

PEB Forum Regular Member
Registered Member
Disregard located it in DA Form 199 Section 5 Administrative Determinations, of the new form dated Mar 2012.
10 D is the equivalent of
Statement 4: " The disability severance pay was 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)".
 

Jamesc

PEB Forum Regular Member
Registered Member
Disregard located it in DA Form 199 Section 5 Administrative Determinations, of the new form dated Mar 2012.
10 D is the equivalent of
Statement 4: " The disability severance pay was 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)".
That's exactly what mine says too! So that means its non taxable right?
 

LizzeKay

Active Member
Registered Member
I also faxed my paperwork before December 31st and my w2 has included the severance amount and taxes. I been trying to contact them before I filed my taxes. I knw it's usually a wait at least two months..
 

SGM Anaconda

PEB Forum Regular Member
Registered Member
So as I have read these threads, you can get your severence tax free in some cases/ My case is injury occurred in Iraq(under Section V V4-Yes, will that allow me to take severence tax free? and then I am only Army rated currently at 20% if I read another post correctly the VA would only take a small portion of my VA check out to recoup? So does the V4-Yes not work for the DAV side for exempt? Just wondering
 

19DScout

PEB Forum Regular Member
Registered Member
Just wanted to add, my W-2 came incorrect. The wages did not reflect my severance as non taxable. But the fed tax did. So I "owe" over $9k until I get the corrected W-2.

The correct and currents numbers and process to get a corrected W-2 are:

Fax the request to 317-275-0281, type or write "CODE TX-F" in big ass letters across the top of the request and be sure to sign it at the bottom. I included my SSN, current phone #, address and a brief description on the issue and why I needed a corrected W-2. I used www.hellofax.com which does work if finding a fax machine is a pain. I made a trial account and received my own fax #, however I never did get a confirmation back.

This process should take 14 days. Even during tax season. One week after faxing the request call 1-866-912-6488, option 1. Call early, they open at 0730 EST. Let them know you want a status update on your W-2C request. Be sure to ask to log in your file that you called. And then request them to send your request again (just as a reminder).

If this process does not meet your April 15th timeline, 2 weeks before the 15th call the IRS @ 800-829-1040. Explain why you need the W-2C and let them know DFAS is taking their time with it. Have your W-2 handy, they will need some info from it as well as an estimated wage and Fed tax amount. Then they will send DFAS a nasty gram stating they have 10 days to make it right or DFAS can be fined. (doubtful but that is what it says on the IRS website)

I hope this comes in handy for anyone needing a W-2C.

Scouts Out
 

19DScout

PEB Forum Regular Member
Registered Member
W-2 has been corrected. Looks like I am completely done with my ETS now. Aside from another year of base privileges. Bittersweet.
 

Warrior644

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PEB Forum Veteran
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W-2 has been corrected. Looks like I am completely done with my ETS now. Aside from another year of base privileges. Bittersweet.
All right, congratulations! :D

Indeed, maintaining a positively proactive stance enabled the completion for receipt of a W-2C for sure! Enjoy! :)

Thus, I quite often comment that "possessing well-informed knowledge is truly a powerful equalizer."

Best Wishes!
 

MarineChix26

PEB Forum Regular Member
PEB Forum Veteran
Registered Member
I am so sorry to possibly be asking a question that was already posed, BUT I am trying to get my documentations together to send to DFAS (Cleveland) and I'm not sure exactly what should be sent (BARNEY STYLE). Please excuse my ignorance, but What should my VA award letter look like? Is that something I could generate from ebenefits? I understand that there is no verification of reciept of this paperwork so I just want to make sure I do it correctly the FIRST time. I have a wedding coming up next year and the 10K would help out tremendously! Thank you all again!
 

Warrior644

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Staff Member
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Lifetime Supporter
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I am so sorry to possibly be asking a question that was already posed, BUT I am trying to get my documentations together to send to DFAS (Cleveland) and I'm not sure exactly what should be sent (BARNEY STYLE). Please excuse my ignorance, but What should my VA award letter look like? Is that something I could generate from ebenefits? I understand that there is no verification of reciept of this paperwork so I just want to make sure I do it correctly the FIRST time. I have a wedding coming up next year and the 10K would help out tremendously! Thank you all again!
Well, yes only if the DoVA D-RAS has completed finalizing your proposed ratings then the official VA award letter should be available within eBenefits via access my documents -> download VA letters -> select a letter from the following list or similar path.

To that extent, indeed, congratulations on your forthcoming wedding next year! :D

Thus, I quite often comment that "possessing well-informed knowledge is truly a powerful equalizer."

Best Wishes!
 

hymhim

Member
Registered Member
Has anyone recently faxed the required documents to DFAS IN requesting a refund on taxes taken out your Severance Pay? If so, how long was your process and is there away to check the status on line?
 

alibs

PEB Forum Regular Member
PEB Forum Veteran
BUmping this and up date on me. So I got my revised W2 from DFAS in Feb 2014. After dealing with the IRS back and fort the last 10 months, they finally said, they don't have an official revised W2 on file... So back to DFAS. And DFAS told me They filed the W2s as soon as it was issued. So waiting on DFAS again. So recap... I got out in Sept 2012, it took over a year for DFAS to fix my W2 in the first place...
 

HEKETR42

PEB Forum Regular Member
PEB Forum Veteran
Registered Member
I was told by my MSC that since my percentage from VA was 100 plus I will not have to pay back my severance money, does anyone be told the same or have similar outcome???? also will like to know if someone can tell me how long will take for the severance money be deposited in my bank?
 

Pollo

Member
Registered Member
Don't know if this has been posted, but I always see the question asked so I'll post it up anyways.

INFORMATION PAPER

5 Jan 11
SUBJECT: Disability SeverancePay Tax Refund/Issues

1.Purpose. To inform disabled Soldiers, separated withseverance pay, of possible tax refunds.

2. Under the currentdepartment of Defense Finance and Accounting Service (DFAS) and the InternalRevenue Service (IRS) interpretations of federal law, there are tax advantagesyou should know about. If yourdisability falls under one of four categories you are eligible for thesebenefits. The first three are based onadministrative determinations referred to as 10 a, b, or c, on DA Form 199, andare made by the Physical Evaluation Board (PEB). The fourth is a disability determination madeby Veterans Affairs (VA). You should askyour Physical Evaluation Board Liaison Officer (PEBLO) if your disability wasdesignated as either 10 a, b, or c in the PEB proceedings. If such a designation was granted DFAS shouldnot take any Federal Taxes out of your disability severance pay. If you have the tax taken out when awardedeither a 10 a, b, or c designation DFAS has instructed that the field financeoffice is to contact DFAS at [email protected]to ensure automatic prompt refund of the withheld taxes.


3. a. If your PEBLO tells you that the PEB found youineligible for a 10 a, b, or c designation, your severance pay will be taxedINITIALLY. However, you may stillqualify for a tax break if you are awarded a VA disability rating for the samecondition that resulted in your medical discharge. For example, if you are found unfit by thePEB for a right knee injury, and, subsequently, the VA also rates that sameright knee, you can apply for a refund of the taxes withheld. To secure your refund, upon receipt of yourVA rating, follow the directions below.

b. DFAS can refundall of your severance pay taxes. However, as of the date of this paper, the IRS has not officially endorsed the DFAS position that you are eligible for afull refund. Specifically, the IRS hasnot officially stated how much of a refund you are eligible to receive. Consequently, in the future the IRS could claim that you underpaid your taxes for the tax year in which you received yourrefund from DFAS.


(1) To secure the refund you must send copies of your separation orders, DD Form 214, VA award documentation, and the attachedsample cover letter #1 to DFAS by fax 317-275-0248/ ATTN: Separations Branch or scan and email [email protected].
[UPDATE- SEE POSTS BELOW, THIS EMAIL IS OBSOLETE/NOT VALID]


(2) If you follow the above guidelines, but arenot provided a refund within two (2) months of your request, contact theSeparation and Reenlistment Division at DSN 699-5950/2829 or commercial 317-212-2829or 317-212-5950. [email protected].

(3) The request, with all necessary documentation,must be received at DFAS by 31 December of the year in which you received your separation paycheck. If your requestdoes not meet this deadline, DFAS cannot provide you with any refund. DFAS has indicated they will not provide youa corrected W-2 if you do not meet the same calendar year deadline.

(4) Ifyou are not eligible to request a refund from DFAS because of the timelimitations, and you have not filed your tax return for that tax year, you mayfile a tax return and include a copy of the VA Award to inform the IRS that theseverance pay should not be considered taxable. You should file your Federal Return with “ST CLAIR vs. THE UNITEDSTATES” written across the top of the tax form. If you have already filed your tax return for that tax year you willhave to ask the IRS for a refund. Be aware that, as of the date of this paper, the IRS does not have an official position on what portion of your severance pay is tax-free. Consequently,you may not get a full refund. Moreover,in the future the IRS could claim that you underpaid your taxes for the tax year in which you received your refund. In an attempt to secure a refund from IRS, you must mail to the IRS copies of yourFederal Individual Tax Return (or amended return 1040X, if appropriate – with the ST CLAIR vs. THE UNITED STATES written on the top) for the year in whichyou received your severance pay, original IRS Form W-2, VA disability award documentation, DD Form 214, separation orders, and the enclosed sample coverletter #2. Address your request and sample cover letter to your servicing IRS location. This last IRS request is not always known by all IRS employees and sometimes there can be less then complete success in every filing.

Enclosures

2 Sample letters

Prepared by:

Dennis Brower

Agency Legal Advisor

USAPDA

202-782-3002 (DSN 662)


SAMPLE COVER LETTER #1

DEFENSE FINANCE AND ACCOUNTING SERVICE __/__/__

INDIANAPOLIS CENTER

ATTN: DFAS-PJEC/IN

8899 EAST 56TH STREET

INDIANAPOLIS,IN 46249-0801



Dear Sir/Ma’am:



I was medically discharged from the U.S. Army/ARNG, on . I was awarded severance pay in the amount of dollars. My disability severance pay was taxed. This money was withheld for payment to the IRS.

I have now received a disability rating from the Veterans Affairs (VA) for the samedisability for which the Army compensated me, and in the same calendar year that I received my severance pay. Therefore, under the provisions of 26 U.S.C. § 104(b)(2), I am eligible for DFAS refund of the taxes withheld.

Enclosed are copies of the following documents to support my request:


· VA award documentation

· Separation orders

· DD Form 214 (or 215)

Please contact meif you require additional information. My current phone # is (___) ___-____. My current address is

Military pay account # (SSAN)_______________________________________________.

My Current banking information is:

Financial Organization: ____________________________________________________.

Routing Number:_________________________________________________________.

Account Number: _________________________________________________________.

Checking ( ) or Savings ( ).


Your prompt attention to this request is appreciated.


SAMPLE COVER LETTER #2


INTERNAL REVENUE SERVICE CENTER __/__/__


Dear Sir/Ma’am:



I was medically discharged from the U.S. Army/ARNG, on . I was awarded severance pay in the amount of dollars. My disability severance pay was taxed. This money was withheld and paid to the IRS in tax year ____.


I have now receiveda disability rating from the Veterans Affairs (VA) for the same disability forwhich the Army compensated me.

Under theprovisions of 26 U.S.C. § 104(a)(4), and 26 U.S.C. § 104(b)(2) (D), asinterpreted by the District Court in St. Clair v. United States,disability severance payments are amounts received for personal injury(ies) andare thus excludable from taxable income. The only caveats are (1) a VA rating for the injury for which severancepay was granted and (2) a waiver of an equivalent amount of VA disability pay(See IRS “Action on Decision”, #cc-1992-006, distributed 19 Dec 1991).

As indicated, I am in receipt of a VA rating for the injury for which I was granted severance pay,and I have waived a like amount of my VA disability pay. Therefore, I request a refund of taxes withheld in year ____, the year in which I received my severance pay.
Accounting and tax services http://yourbooksontime.com
Enclosed are copies of the following documents to support my request.

· Individual Federal Tax Return for the year _____(the year in which I received my severance pay)

· Original IRS Form W-2

· Corrected IRS Form W-2

· VA award documentation

· Separation orders

· DD Form 214

Please contact meif you require additional information. My current phone # is (___) ___-____. My current address is


Your promptattention to this request is appreciated.

Sincerely,
Yes it does ^)
 
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