Combat Injured Veteran's Tax Fairness Act of 2016

Chem_SM

PEB Forum Regular Member
PEB Forum Veteran
Hi,
I received a letter from DFAS stating it would refund the taxes paid for my Disability Severance Pay if taxes were paid. How do I find out if they taxed this? It was 2010 when I separated. When filing for this it wants me to include my DD214, Separation Orders, and the letter from the VA that starts with We made a decision...

I've got my DD214 and VA Letter, but the only separation orders I have been able to get are from the website milConnect: Benefits and Records for DoD Affiliates
These orders state that I'm being "released not by reason of physical disability." These orders are not the orders I used to get out of the Army. These orders were rescinded.

Note: I was supposed to get out in October 2009. My MEB was not complete until early 2010. I separated from the Army in April 2010. So, I got 3 sets of orders before it was all said and done.

Note: DD214- In section 28 "Narrative Reason for Separation" it states Disability, Severance Pay, Non-Combat Related.

So, any idea how to get the separation orders that I actually used? Should I even pursue this since my DD214 say Non-Combat Related? I'm against the clock because this letter was put in a stack of mail that I fortunately just found. Sadly, I have less than a month to get this done! Any information or guidance would be hugely appreciated.
 

RonG

Super Moderator
Staff Member
PEB Forum Veteran
Registered Member
[excerpt from LINK <---]

Under federal law, any service member who suffers a combat-related injury AND is separated from the military receives ...
a one-time, lump-sum disability severance payment based on their rank and years of service. Although the payout was supposed to be tax-free, DoD routinely took taxes out of the severance pay, according to advocacy groups. The 2016 law mandated that DoD stop improperly taxing the pay.

The notification letters will provide information to veterans on how they can apply for the refund. Defense officials have been working with Internal Revenue Service officials to clarify the process, Dulaney said.
-------

If you've been discharged from military service, your personnel files are stored at the National Archives and Records Administration (NARA). They are the official repository for records of military personnel who have been discharged from the U.S. Air Force, Army, Marine Corps, Navy and Coast Guard. How to obtain documents from NARA: LINK <----

Retirement and separation orders are commonly kept by individuals with their other important documents. The NARA is the only other place of which I am aware might have the orders you need.

Ron
 

RonG

Super Moderator
Staff Member
PEB Forum Veteran
Registered Member
Information regarding refund, IRS: Veterans owed refunds for overpayments attributable to disability severance payments...<----LINK

Special Instructions
All veterans claiming refunds for overpayments attributable to their lump-sum disability severance payments should write either “Veteran Disability Severance” or “St. Clair Claim” across the top of the front page of the Form 1040X that they file. Because all amended returns are filed on paper, veterans should mail their completed Form 1040X, with a copy of the DoD letter, to:

Internal Revenue Service
333 W. Pershing Street, Stop 6503, P5
Kansas City, MO 64108

Veterans eligible for a refund who did not receive a letter from DoD may still file Form 1040X to claim a refund but must include both of the following to verify the disability severance payment:

  • A copy of documentation showing the exact amount of and reason for the disability severance payment, such as a letter from the Defense Finance and Accounting Services (DFAS) explaining the severance payment at the time of the payment or a Form DD-214, and
  • A copy of either the VA determination letter confirming the veteran’s disability or a determination that the veteran’s injury or sickness was either incurred as a direct result of armed conflict, while in extra-hazardous service, or in simulated war exercises, or was caused by an instrumentality of war.
Veterans who did not receive the DoD letter and who do not have the required documentation showing the exact amount of and reason for their disability severance payment will need to obtain the necessary proof by contacting the Defense Finance and Accounting Services (DFAS).

More information on this issue is available on IRS.gov. ---->LINK

Ron
 
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