Combat Vet Disability Tax Act-Disability severance pay

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ChefSal54

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Hello all,

I've been reading up on this disability severance refund tax act thing, over 130,000 of us should be entitled to. My problem is, I haven't got a letter but federal and state withheld over $3,000 of my disability severance pay. I've had a lot of addresses and a document like that probably was returned to sender. I spent 7 hours on the phone today with the IRS, DFAS, DOD, and the Coast Guard to find out NOTHING. Noone of the 19 different people I spoke to today, had no clue about this possibility of a refund. All I know is I have my DD-214 stating they withheld over $3,000 of my disability severance pay, my VA award letter, and my transcript from 2009. (All of the required documents) I'd imagine im eligible because the taxes with improperly withheld no?
 
I don't know why its different for everyone but mine was withheld directly from DFAS when I got my severance payout. I got the letter from the IRS on July 18, 2018, sent in the amended return 2 weeks ago and haven't heard anything back yet, but I will update as soon as I do.
 
Are you a combat vet? I was just told and it's incorrect in my opinion that I'm not eligible because I'm not a combat veteran. I am however a service connected veteran that received disabilitt severance pay, had $2500 in federal taxes withheld, and received and have received a VA disability rating which the IRS states makes me eligible. I've honestly received a ton of different answers from a bunch of call center people that are just reading the same thing we are. I just lost my job and $2500 could help me right now but I am very concerned the wrong people are handling this and telling myself and other veterans the wrong information. Either I'm wrong or the IRS's wording on their site is wrong.
 
Yes, I'm a combat vet. It shouldn't have been withheld from me in the first place but it was even after fighting for answers for at least a year. My calls were constantly transferred and faxs/emails were ignored so I finally just wrote the amount off and was happy to get this letter in the mail last month. Unfortunately, the only way I know of being able to possibly get a refund of the taxed severance pay is for your disabling condition to be because of an instrument of war, happen in a combat zone and there is something else I'm forgetting but maybe someone can help me out and fill it in.
 
You don't file an amended return. You fill out a 1040x and send it in along with a copy of the letter.

You don't have to be a combat vet. - It is either combat related injury or illness or if you receive VA disability compensation -

You can request a standard refund, which differs depending on the year you were discharged, or, if you can obtain your tax return from that year, you can file for the exact amount that was paid.

This is part of my problem. My wife is still AD and we are currently in Japan, so I am having trouble contacting the IRS to get my tax information from that year. The farthest back you can go on their website is 3 years, but I was discharged in 2007.

You will have 1 year from the date of the letter to file the form.
 
I received the VA Disability Severance Refund (in Dec. 2018) after 16 weeks of typical gov't red tape. I expected just the refund pertaining to the year of my discharge. However, the IRS (in their infinite and confusing wisdom) added decades of interest. Although it was an answer to my prayers, I have no idea how to report that on my 2018 income tax return. I'm using the TurboTax app. Can anyone offer any advice? TIA
 
I'm not tax guy or accountant but pretty sure you don't have to. It's non taxable income. Pretty sure it's exempt as reportable income
 
Let me provide a few details of clarification: I was discharged in 1991. The IRS said I was owed $1,750. However, they paid 27 years of interest that amounted to over $5K+. It's the latter amount I was told had to be claimed. I called the IRS. There was a bunch of finger-pointing and after spending over an hour on the phone, I still didn't get an answer. A search on Google just amounted to several unhelpful sites.
 
NavyMom0505 said:
I received the VA Disability Severance Refund (in Dec. 2018) after 16 weeks of typical gov't red tape. I expected just the refund pertaining to the year of my discharge. However, the IRS (in their infinite and confusing wisdom) added decades of interest. Although it was an answer to my prayers, I have no idea how to report that on my 2018 income tax return. I'm using the TurboTax app. Can anyone offer any advice? TIA
Click to expand...
There is an section of TurboTax where you input 1099-INT (interest) info. I used it in January when I prepared the return for my adult son.

As indicated by gsfowler in this thread, interest paid by the IRS is taxable [in the year it was paid].

Ron
 
NavyMom0505 said:
I received the VA Disability Severance Refund (in Dec. 2018) after 16 weeks of typical gov't red tape. I expected just the refund pertaining to the year of my discharge. However, the IRS (in their infinite and confusing wisdom) added decades of interest. Although it was an answer to my prayers, I have no idea how to report that on my 2018 income tax return. I'm using the TurboTax app. Can anyone offer any advice? TIA
Click to expand...
You should have received a 1099INT from the IRS. You will file that with your taxes for 2018. The interest portion is taxable (the rate is pretty high, too).
 
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