DSP; Taxability, Recoupment, Etc...

I

imisspizza

PEB Forum Regular Member
Registered Member
Hey all, just got my PEB results back and looking for some clarity and guidance.

0% DOD / 100% VA

My questions and confusion right now surround the taxation of the Disability Severance Pay and whether the VA will try to recoup.

1) If I take the DSP, separate from service, then appeal the referred condition to the VA for a higher rating and am awarded 10% for the referred condition is the entirety of the DSP eligible to be tax free?
2) Given the referred condition is not part of my 100% VA calculation, will the VA try to recoup any of the DSP?

Note: I understand I can appeal while in, collect a check and relax but I am over it, and with 15+ years in the severance is massive; especially if I can get a higher rating and receive the tax refund.

Appreciate any insight anyone can provide. Thank you!




12/13/24: PA refer to MEB
2/11/25: MEB start & PEBLO intake
2/18: First C&P Exams
3/12: Last C&P Exams
3/25: Received NARSUM
3/28: Submitted NARSUM after review with OSC/JAG
5/9: VA Claim Closed on App
5/15: PEB decision/ratings notification
 
imisspizza said:
Hey all, just got my PEB results back and looking for some clarity and guidance.

0% DOD / 100% VA

My questions and confusion right now surround the taxation of the Disability Severance Pay and whether the VA will try to recoup.

1) If I take the DSP, separate from service, then appeal the referred condition to the VA for a higher rating and am awarded 10% for the referred condition is the entirety of the DSP eligible to be tax free?
2) Given the referred condition is not part of my 100% VA calculation, will the VA try to recoup any of the DSP?

Note: I understand I can appeal while in, collect a check and relax but I am over it, and with 15+ years in the severance is massive; especially if I can get a higher rating and receive the tax refund.

Appreciate any insight anyone can provide. Thank you!




12/13/24: PA refer to MEB
2/11/25: MEB start & PEBLO intake
2/18: First C&P Exams
3/12: Last C&P Exams
3/25: Received NARSUM
3/28: Submitted NARSUM after review with OSC/JAG
5/9: VA Claim Closed on App
5/15: PEB decision/ratings notification
Click to expand...
if you can reach 100% without needing the unfitting condition % then there will be no recoupment from your monthly VA compensation.
 
Provis said:
if you can reach 100% without needing the unfitting condition % then there will be no recoupment from your monthly VA compensation.
Click to expand...
DSP is 100% tax free. By law DFAS has to do a tax reduction, but you qualify for an exemption since you have a purposed va rating. Let me know if you need the link, as I have down this within the past two weeks. VA recoupment of severance pay is a booger concern. I am currently fighting the VA for trying to take mine.

M21-1 VI.ii.2.3.g-h. VA may not withhold any compensation to recoup the Veteran's disability severance pay while the non-severance-pay disability is rated 100-percent disabling.
 
SunGOD12 said:
DSP is 100% tax free. By law DFAS has to do a tax reduction, but you qualify for an exemption since you have a purposed va rating. Let me know if you need the link, as I have down this within the past two weeks. VA recoupment of severance pay is a booger concern. I am currently fighting the VA for trying to take mine.

M21-1 VI.ii.2.3.g-h. VA may not withhold any compensation to recoup the Veteran's disability severance pay while the non-severance-pay disability is rated 100-percent disabling.
Click to expand...
Hey SunGOD, appreciate the response. Please send the link if you have it available - I have discussed this with my PEBLO, MSC, JAG, the VA, and DFAS and no one understands what I am trying to do or believes I am eligible for a tax refund. Thanks in advance!
 
imisspizza said:
Hey SunGOD, appreciate the response. Please send the link if you have it available - I have discussed this with my PEBLO, MSC, JAG, the VA, and DFAS and no one understands what I am trying to do or believes I am eligible for a tax refund. Thanks in advance!
Click to expand...
Sorry for the late response.

Copy things to note, you just upload your official VA rating not the proposed one and they can’t process the request if it’s in audit. I would just submit if you have your official VA rating memo.

They told me 20 business days to process my request.


 
Something else to note, if you deduct your did rating and you are 100% you don’t have to pay back the DSP at all. Initially the VSR made a mistake on mine and started a “bel” claim to start the recoupment process and before I could provide a written statement with the supporting regulation telling them they were wrong, the rater fixed the error. My rater friends told me that VSRs across the board are fairly young and take the conservative approach leading to this error frequently.
 
Please, few questions I am seriously trying to get answers on.

Firstly, I have VA 100% P&T and DOD 20%, if 20% Dod is deducted, I will be in 90% which put me in recoupment phase. My question is, will VA stop monthly recoupment if I increase my ratings in some conditions that I was given 0% before which will now still put me on 100% P&T even after the deduction of DOD 20%? Is there a duration or time frame I have to do this increament? And will VA refund the few months already withheld or how does it work?

Secondly, if DFAS withheld my severance pay tax and I claim it back. Do I have to report all the severance pay on my taxes I will file? And will they resend me a new final LES if one has been sent out before?

Thirdly, if VA stop monthly severance recoupment, does that means I can't get back taxes withheld from DFAS, and if I have already gotten it from DFAS, then I have to pay taxes on them whenever I file my taxes?

Thank you!
 
You must log in or register to reply here.
Top