Severance Pay

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hawkdrivermtp

PEB Forum Regular Member
PEB Forum Veteran
Rec'd a computer generated, standard stock letter from the Seattle VA Regional Office in my mailbox yesterday.

"Sorry, we're not done with processing your claim" (or words to this effect).

No reason was given for the delay nor was ant timelime given for any completion date.

Meanwhile, DFAS has paid me my 59.5 days of sale of leave and the back pay on annual clothing allowances I never rec'd while on active duty.

Jeep Freak said this letter is a common one - he's gotten a few himself.

Well, I need new wallpaper - so guess this will have to do for now.
lol
nwlivewire
I am selling 60 days of leave once I get the opportunity. I assume I will be doing that here this week or next since I get my orders tomorrow. I was just curious how long it took to get the 59.5 days worth of funds deposited into your account. I know I wont see my severance until my leave is up but trying to figure out how long it will take to get my 60 days of sold leave paid to me. Thanks in advance!

PS. Sure wish I could get back pay of clothing allowance! I haven't been paid a clothing allowance since 2001, but as a Warrant, I am not authorized that benefit. Glad you were able to get your backpay!
 

nwlivewire

PEB Forum Regular Member
PEB Forum Veteran
I am selling 60 days of leave once I get the opportunity. I assume I will be doing that here this week or next since I get my orders tomorrow. I was just curious how long it took to get the 59.5 days worth of funds deposited into your account. I know I wont see my severance until my leave is up but trying to figure out how long it will take to get my 60 days of sold leave paid to me. Thanks in advance!

PS. Sure wish I could get back pay of clothing allowance! I haven't been paid a clothing allowance since 2001, but as a Warrant, I am not authorized that benefit. Glad you were able to get your backpay!

On another thread, I reported that DFAS had my Sale of Leave money electronically deposited to my account about 60 days after I discharged.

DFAS seems to be running on time - VA is another issue (nothing yet).

Sale of Leave was taxed - all of it. I rec'd approximately 67% net of my gross amount. Lost 25% to the Feds in tax and 8% to my State (33%). No FICA taken out.

It only took two years and 3 inquiries to get my clothing allowance. That money was tax free (I assume it is not considered wages), and was coincidentally deposited into my account 2 days before my Sale of Leave money hit my account.

v/r,
nwlivewire
 

JAlmond

Member
Registered Member
Im going on 9 months, lets see 30x9 that 270days without anything, no diability severance lol I swear this is a joke! I dont know if its taking longer cause my injuries occured in combat and it is tax free and not recouped. I have no damn clue... I contacted my congressman hoping for something. I hope noone else is in this predicament.
 

floobs

Member
Registered Member
As for Severence that is taxed:
This is the information that was provided to me by my PEBLO in order to get Disability Severence Tax Refunded:

Under the current DFAS, and the IRS interpretation of federal law, there are tax advantages you should know about. If your disability falls under one of four categories you are elegible for these benefits. The first three are based on administrative determinations refered to as 10a, b, or c, on DA Form 199, and are made by the Personal Evaluation Board ( PEB ). The fourth is a disability determination made by the VA. You should ask your PEBLO if your disability was designated as either 10a, b, or c in the PEB proceedings. If such a designation was granted DFAS should not take any federal taxes out of your disability severence pay. If you have the tax taken out when awarded either a 10a, b or cdesignation DFAS has instructed that the field finance office is to contact DFAS at [email protected] to ensure automatic prompt refund of the witheld taxes.

If your PEBLO tells you that the PEB found you inelegible for a 10a, b or c designation, your severence pay will be taxed initially. However, you may still qualify for a tax break if you are awarded a VA disability rating for the same condition that resulted in your medical discharge. For example, if you are found unfit by the PEB for a right knee injury, and, subsequently, the VA also rates that the same right knee, you can apply for a refund of the taxes witheld. To secure your refund, upon receipt of your VA rating, follow the dirrections below.

DFAS can refund all of your severence pay taxes. HOWEVER, AS OF THE DATE OF THIS PAPER, THE IRS HAS NOT OFFICIALLY ENDORSED THE DFAS POSITION THAT YOU ARE ELEGIBLE FOR A FULL REFUND. SPECIFICALLY, THE IRS HAS NOT OFFICIALLY STATED HOW MUCH OF A REFUND YOU ARE ELEGIBLE TO RECIEVE. CONSEQUENTLY, IN THE FUTURE THE IRS COULD CLAIM THAT YOU UNDERPAID YOUR TAXES FOR THE TAX YEAR IN WHICH YOU YOU RECIEVED YOUR REFUND FROM DFAS.

To secure the refund, you must send copies of your seperation orders, DD214, VA award documentation, and the attached sample cover letter to DFAS by fax (317)275-0248 / ATTN: Seperation branch or scan and email to [email protected].

If you follow the above guidelines, but are not provided a refund within two months of your request, contact the seperation and reenlistment division at DSN 699-5950 / 2829 or commercial: (317)212-2829 or (317)212-5950. [email protected].

The request, with all necessary documentation, must be recieved by DFAS by 31 DEC of the year in which you recieved your seperation paycheck. If your request does not meet this deadline, DFAS cannot provide you with any refund. DFAS has indicated they will not provide you a corrected W-2 if you do not meet the same calandar year deadline.

If you are not elegible to request a refund from DFAS because of the time limitations, and you have not filed your tax return for that tax year, you may file a tax return and include a copy of the VA award to inform the IRS that the severence pay should not be considered taxable. You should file your federal return with " ST. CLAIR vs. THE UNITED STATES" written across the top of the tax form. If you have already filed your tax return for that tax year you will have 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 SEVERENCE 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 RECIEVED YOUR REFUND. In an attempt to secure a refund from the IRS, you must mail to the IRS copies of your federal individual tax return ( or ammended return 1040X, if appropriate - with the ST. CLAIR vs. THE UNITED STATES written on the top ) for the year in which you recieved your severence pay, original IRS Form W-2, VA Disability Award documentation, DD Form 214, seperation orders, and the enclosed sample cover letter 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 than complete success in every filing.


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 US Army / ARNG, on ___________. I was awarded severence pay in the amount of _____________ dollars. My disability severence pay was taxed. This money was witheld for payment to the IRS.

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

Enclosed are copies of the following documents to support my request:
• VA Award Documentation
• Seperation Orders
• DD Form 214 ( or 215 )

Please contact me if you require additional information. My current phone number is ( )-----------------. My current address is _____________________________________.
Military Pay Account: ____________________________________
My current banking information is :
Financial Organization:____________________________________
routing:________________________________________________
account:_______________________________________________
Checking ( ) Savings ( )

Your prompt attention to this request is appreciated.





Sample 2 -

INTERNAL REVENUE CENTER
_________________________
_________________________
_____________ _________

Dear Sir / ma'am:

I was medically discharged from the US Army / ARNG, on ___________. I was awarded severence pay in the amount of _____________ dollars. My disability severence pay was taxed. This money was witheld for payment to the IRS in Tax year _____.

I have now recieved a disability rating from the Veterans Affairs ( VA ) for the same disability for which the Army compensated me.

Under the provisions of 26 U.S.C. §104 (a)(4), and 26 U.S.C. §(b)(2) (D), as interpreted by the District Court in St. Clair vs. The United States, Disability severence payments are amounts received for personal injury(ies) and are thus excluded from taxable income. The only caveats are (1) a VA rating for the injury for which severence pay 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 reciept of a VA rating for the injury for which I was granted severence pay, and I have waived a like amount of my VA disability pay. Therefore, I request a refund of taxes witheld in year _____, the year in which I recieved my severence pay.

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

• Individual Federal Tax Return for the year _________ ( the year I recieved my severence pay )
• Original IRS Form W-2
• Corrected IRS Form W-2
• VA Award Documentation
• Seperation Orders
• DD Form 214

Please contact me if you require additional information. My current phone number is ( )_________. My current address is ____________________________________.


Sincerely,



hiope this helps anyone out there to recover their taxed severence~

Mark~

As for Severence that is taxed:
This is the information that was provided to me by my PEBLO in order to get Disability Severence Tax Refunded:

Under the current DFAS, and the IRS interpretation of federal law, there are tax advantages you should know about. If your disability falls under one of four categories you are elegible for these benefits. The first three are based on administrative determinations refered to as 10a, b, or c, on DA Form 199, and are made by the Personal Evaluation Board ( PEB ). The fourth is a disability determination made by the VA. You should ask your PEBLO if your disability was designated as either 10a, b, or c in the PEB proceedings. If such a designation was granted DFAS should not take any federal taxes out of your disability severence pay. If you have the tax taken out when awarded either a 10a, b or cdesignation DFAS has instructed that the field finance office is to contact DFAS at [email protected] to ensure automatic prompt refund of the witheld taxes.

If your PEBLO tells you that the PEB found you inelegible for a 10a, b or c designation, your severence pay will be taxed initially. However, you may still qualify for a tax break if you are awarded a VA disability rating for the same condition that resulted in your medical discharge. For example, if you are found unfit by the PEB for a right knee injury, and, subsequently, the VA also rates that the same right knee, you can apply for a refund of the taxes witheld. To secure your refund, upon receipt of your VA rating, follow the dirrections below.

DFAS can refund all of your severence pay taxes. HOWEVER, AS OF THE DATE OF THIS PAPER, THE IRS HAS NOT OFFICIALLY ENDORSED THE DFAS POSITION THAT YOU ARE ELEGIBLE FOR A FULL REFUND. SPECIFICALLY, THE IRS HAS NOT OFFICIALLY STATED HOW MUCH OF A REFUND YOU ARE ELEGIBLE TO RECIEVE. CONSEQUENTLY, IN THE FUTURE THE IRS COULD CLAIM THAT YOU UNDERPAID YOUR TAXES FOR THE TAX YEAR IN WHICH YOU YOU RECIEVED YOUR REFUND FROM DFAS.

To secure the refund, you must send copies of your seperation orders, DD214, VA award documentation, and the attached sample cover letter to DFAS by fax (317)275-0248 / ATTN: Seperation branch or scan and email to [email protected].

If you follow the above guidelines, but are not provided a refund within two months of your request, contact the seperation and reenlistment division at DSN 699-5950 / 2829 or commercial: (317)212-2829 or (317)212-5950. [email protected].

The request, with all necessary documentation, must be recieved by DFAS by 31 DEC of the year in which you recieved your seperation paycheck. If your request does not meet this deadline, DFAS cannot provide you with any refund. DFAS has indicated they will not provide you a corrected W-2 if you do not meet the same calandar year deadline.

If you are not elegible to request a refund from DFAS because of the time limitations, and you have not filed your tax return for that tax year, you may file a tax return and include a copy of the VA award to inform the IRS that the severence pay should not be considered taxable. You should file your federal return with " ST. CLAIR vs. THE UNITED STATES" written across the top of the tax form. If you have already filed your tax return for that tax year you will have 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 SEVERENCE 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 RECIEVED YOUR REFUND. In an attempt to secure a refund from the IRS, you must mail to the IRS copies of your federal individual tax return ( or ammended return 1040X, if appropriate - with the ST. CLAIR vs. THE UNITED STATES written on the top ) for the year in which you recieved your severence pay, original IRS Form W-2, VA Disability Award documentation, DD Form 214, seperation orders, and the enclosed sample cover letter 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 than complete success in every filing.


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 US Army / ARNG, on ___________. I was awarded severence pay in the amount of _____________ dollars. My disability severence pay was taxed. This money was witheld for payment to the IRS.

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

Enclosed are copies of the following documents to support my request:
• VA Award Documentation
• Seperation Orders
• DD Form 214 ( or 215 )

Please contact me if you require additional information. My current phone number is ( )-----------------. My current address is _____________________________________.
Military Pay Account: ____________________________________
My current banking information is :
Financial Organization:____________________________________
routing:________________________________________________
account:_______________________________________________
Checking ( ) Savings ( )

Your prompt attention to this request is appreciated.





Sample 2 -

INTERNAL REVENUE CENTER
_________________________
_________________________
_____________ _________

Dear Sir / ma'am:

I was medically discharged from the US Army / ARNG, on ___________. I was awarded severence pay in the amount of _____________ dollars. My disability severence pay was taxed. This money was witheld for payment to the IRS in Tax year _____.

I have now recieved a disability rating from the Veterans Affairs ( VA ) for the same disability for which the Army compensated me.

Under the provisions of 26 U.S.C. §104 (a)(4), and 26 U.S.C. §(b)(2) (D), as interpreted by the District Court in St. Clair vs. The United States, Disability severence payments are amounts received for personal injury(ies) and are thus excluded from taxable income. The only caveats are (1) a VA rating for the injury for which severence pay 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 reciept of a VA rating for the injury for which I was granted severence pay, and I have waived a like amount of my VA disability pay. Therefore, I request a refund of taxes witheld in year _____, the year in which I recieved my severence pay.

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

• Individual Federal Tax Return for the year _________ ( the year I recieved my severence pay )
• Original IRS Form W-2
• Corrected IRS Form W-2
• VA Award Documentation
• Seperation Orders
• DD Form 214

Please contact me if you require additional information. My current phone number is ( )_________. My current address is ____________________________________.


Sincerely,



hiope this helps anyone out there to recover their taxed severence~

Mark~
I understand the rules for federal taxes being refundable but have not seen anything about State taxes, do the same rule apply?
 

zack

Member
Registered Member
Does any one know who I have to contact to find out when I get my severance pay? Please and thank you
 

Warrior644

Super Moderator
Staff Member
PEB Forum Veteran
Lifetime Supporter
Registered Member
Does any one know who I have to contact to find out when I get my severance pay? Please and thank you

Welcome to the PEB Forum! :)

Hmm, are you still a military service member (active, or reserve/guard) at this point in time?

In the interim, other PEB Forum members with specifically pin-pointed experiences shall hopefully also provide additional comments and/or feedback. Take care and enjoy life! :cool:

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

Best Wishes!
 

Magilla

PEB Forum Regular Member
Registered Member
Currently on terminal leave after finally getting my ratings last month. ETS date isn't until 24 September, and I've been told varying things in regards to severance pay. Mostly been told to expect sev. Pay, along with last paycheck, which for me should be Oct 1st or 15th. But a few people during my MEB process, told me it takes 45-60 days from your ETS.

I can't find any recent info or whatnot, on guys getting out this past year, on how quickly they receive their severance pay. Any help or info, from guys recently out, would be greatly appreciated.
 

eps17

PEB Forum Regular Member
PEB Forum Veteran
What happens when you receive severance pay for one disability code; and due to an error or injustice the AFBCMR places you on the PDRL at 70% for a different disability code.

Do I have to repay the severance pay four years later? Technically I'm not being paid for the same disability twice.
 

scoutCC

PEB Forum Regular Member
PEB Forum Veteran
Registered Member
Yes. Its not a question of what disability caused the severance pay, it is a question of if they should have paid out severance pay at all. The BCMR went and effectively changed history. The severance pay was an decided to be an error or injustice, shouldn't have ever happened, so they waived a magic wand and poof, no severance pay, retirement instead. Put another way, its not accurate to say you're being paid for different disabilities that was fixed, its the nature of your discharge they are fixing. You only get one discharge per period of service, not two.

However, its not a VA issue, so while any severance pay the VA has withheld counts towards your debt, they are no longer responsible for withholding money to pay it back. That magic wand was waived, there should be no severance pay for the VA to care about. It is still DFAS issue though, there might not be severance pay, but there was a 20k (or whatever) check sent to you, they didn't erase that with the magic wand. Now that there is no severance pay, that check is a problem. Any money you may potentially receive from DFAS will have to be withheld until severance is fully recovered. If retirement pay is entirely waived to receive VA pay, no issue. If you are eligible for some DFAS retirement money or become eligible for CRSC, they will have to hold off on paying that out for awhile.
 

eps17

PEB Forum Regular Member
PEB Forum Veteran
Well I appreciate the answer and that sucks. Honestly, I'm 100% TDIU through the VA since my date of discharge. The severance pay was 50k for Major Depressive Disorder VA Code 9434 at a 10% disability rating. Get this, the VA hasn't withheld a dime and the only reason I can think so is because the VA rated me at 70% for PTSD using a different VA Code of 9411 and NOT Major Depressive Disorder which is what I was MEB'd for.. So on a technicality I haven't or wasn't paid for the same disability twice - hence no recoupment/repayment/withholding of money by the VA to pay the severance back.

NOW the AFBCMR advisory opinion says they want to place me on the PDRL at 70% for PTSD, Code 9411. I have NO IDEA how this is going to play out or what kind of mess I've gotten myself into now. It is probably the most screwed up situation I've ever seen or heard about at this point.

Can anyone take a guess at how this will play out? Since the severance was paid in error, albeit four years ago, is it my fault and does it have to be paid back?

If it does have to be paid back and the VA has to do some withholding; how much are they going to withhold every month? (10% - the original MEB decision for Major Depression, or 70% - the AFBCMR corrected version for PTSD)
 

gsfowler

Super Moderator
Staff Member
PEB Forum Veteran
The severance should be paid back, there are a number of ways that it can happen. Are you eligible for CRSC? Quite often the CRSC back pay will offset the severance and you will start over at square one.
 

eps17

PEB Forum Regular Member
PEB Forum Veteran
The severance should be paid back, there are a number of ways that it can happen. Are you eligible for CRSC? Quite often the CRSC back pay will offset the severance and you will start over at square one.
I "should" be eligible and/or awarded CRSC. I believe my VA medical records support it; however I do not know what the revised/corrected AF Form 356 will indicate in regard to the combat related designation. It SHOULD be marked as a yes that the condition was incurred and/or aggravated in a combat zone since I was treated there - however, on the original AF Form 356 that they are correcting it was marked as "NO".

I've been separated 53 months now at 100% TDIU since my date of discharge. I can't even imagine what that would equate to in CSRC if in fact the AFBCMR decides to retire me at 70%. The VA has the condition listed as "secondary to service in Iraq" or something to that effect - whatever that means.
 

Jason Perry

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I "should" be eligible and/or awarded CRSC. I believe my VA medical records support it; however I do not know what the revised/corrected AF Form 356 will indicate in regard to the combat related designation. It SHOULD be marked as a yes that the condition was incurred and/or aggravated in a combat zone since I was treated there - however, on the original AF Form 356 that they are correcting it was marked as "NO".

I've been separated 53 months now at 100% TDIU since my date of discharge. I can't even imagine what that would equate to in CSRC if in fact the AFBCMR decides to retire me at 70%. The VA has the condition listed as "secondary to service in Iraq" or something to that effect - whatever that means.

Anybody have a guess?

Have you not applied for CRSC?

Not sure why any other action should matter for you having applied for CRSC?

Not sure you are understanding the issue and/or the requirements for getting a CRSC finding.
 

eps17

PEB Forum Regular Member
PEB Forum Veteran
I'll have to wait and see if the AFBCMR follows their medical adviser's opinion for PDRL at 70%. Once retired then I can apply for CRSC.

From my first post above on this thread my situation is unique. Separated with severance for one VA code and then rated in turn by the VA for a different VA code. So technically I wasn't paid twice for the same disability with the severance pay. Now the AFBCMR seems to want to agree with the code the VA used and recommended PDRL at 70% to match my VA rating. Its going to cause a mess with the 50k severance I'm sure.
 

eps17

PEB Forum Regular Member
PEB Forum Veteran
Would anyone know at what rate the VA would withhold for DFAS to recoup my severance pay given the above scenario? I'm currently 100% TDIU.

Any experiences or knowledge would be much appreciated!
 

eps17

PEB Forum Regular Member
PEB Forum Veteran
I'm surprised nobody has a guess. I can't be the only one. Maybe I am though. I have a very unique situation I suppose! I'm still all ears if anyone else wants to take a stab at it.
 

scoutCC

PEB Forum Regular Member
PEB Forum Veteran
Registered Member
Usually the underlying symptom is the issue, not the code used. This makes
So technically I wasn't paid twice for the same disability with the severance pay.
not really the issue. Severance should have been withheld based on the new code VA used.

at what rate the VA would withhold for DFAS
This doesn't seem to apply. VA doesn't withhold for DFAS. VA withholds severance pay because the laws say they should. That money isn't transferred to DFAS, it just reduces the obligation from the treasury. If the BCMR removes severance pay, there is nothing for the VA to withhold. The recoupment is solely DFAS' responsibility. I don't remember any special rules DFAS uses, but I'm sure there are some. This won't be an issue unless DFAS owes you money though, I.e. retirement pay exceeds VA comp or CRSC eligible.
 

eps17

PEB Forum Regular Member
PEB Forum Veteran
I agree. But I'm pretty sure the severance pay paid in error isn't going to just be forgiven. I could be wrong though!
 

eps17

PEB Forum Regular Member
PEB Forum Veteran
So if the VA never withheld for the severance pay and my VA disability pay is 100% TDIU how are they going to recoup it?

I just got notified today by the BCMR that my case was finalized at 70% PDRL for PTSD.
 
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