Tax Refund for disability severance pay

[Jason]

Attached is an information paper on disability severance pay tax refund.

[radcrow]

The IRS is denying my claim for refund - any one have any idea where I should turn for help?
I sent a letter, a copy of my PEB, a copy of my VA rating (that came almost 5 years after my discharge, for 2/3 things I was discharged for) and a few other things that they say are required.

Any help is appreciated

[Jason]

Radcrow,

What did the IRS list as a reason for denying the refund? You have to figure out if this is an IRS "problem" or an issue with the evidence you submitted. Did you submit everything from the memo in the first post?

I am not a tax expert, and if this is an IRS issue, you should talk with your tax advisor. Be aware that there is a 3 year rule for most refunds. That may be the problem. I recommend you look at this publication from the IRS website for more information. There is information in the publication about administrative appeals, too.

[radcrow]

They said because it's been more than 3 years since the tax return. However, the St. Clair decision says something to the affect of 5 years from VA decision date

[Jason]

The IRS error rate on advice is 38%. So, not surprising.

If they gave any instructions on appealing, I would follow them. It looks like this is strictly an IRS issue.

[radcrow]

I'm trying to find something in the St. Clair decision that states the time frame for filing for a refund. Any ideas?
I thought it was within 5 years or so from the VA rating.

The link you originally provided gives information regarding the VA disability rating in the same year, as the sample letters discuss either the severance pay and VA rating in the same year or obtaining a corrected W-2 (which, as noted "There can be no corrected W-2 if the VA rating is not awarded in the same calendar year as the issuance of the severance pay)

[Jason]

Radcrow,

I think I found some bad news regarding your refund. Before I post it, remember, this is not legal advice. As with all the information I post on this site, it is only information. In addition, I have no particular expertise in tax issues and you should not rely on this. You should talk to a tax advisor if you have questions.

There is a case, Lovett v. US, that I found which discusses a very similar fact pattern as what you described. The claim for the refund was time barred. I did not have a chance yet to find if this case has subsequent appellate history or if it has been overturned, so there may be hope yet. I will post what I find, but it may not be today or tomorrow.

As far as what the memo suggests, this is the part that applies in your circumstances: "

In an attempt to secure a refund from IRS, you must mail to the IRS
copies of your Individual Tax Return (or amended return, if appropriate) for the year in which
you received your severance pay, original IRS Form W-2, corrected IRS Form W-2 provided by
DFAS, VA disability award documentation, DD Form 214, separation orders, and the enclosed

sample cover letter #4."

It looks like the time limit is not something St. Clair can adjust. If this is so, there should be a change in the law. It strikes me as very unfair.

[radcrow]

Thanks Jason - I really appreciate your help. I've been searching the internet all day trying to find some law/regulation/statute from the IRS or from the ruling or anywhere.

[Jason]

Glad to help, I just wish I had better news for you.

[radcrow]

Confirmed - I believe it's on the 2nd page of the law. You have to file with the IRS within 3 years of the original filing tax year that you recieved the severance pay.

So, if the VA really fights you - as they did me, you are SOL