Disability Severance Pay and IRS

C

cstrawser

PEB Forum Regular Member
Has anyone ever had any luck in getting their taxes back from the IRS, that were taken out when you got the severance pay? DFAS doesn't issue corrected W-2's.
 
Jason,

When I called IRS, they act like they have no idea of what I am talking about. Any idea of who to talk to there.
 
I don't know that you will find anyone on the phone who will get it right. Besides, you need to file the documentation described in the info paper from the link, above. That is what I would do, just remember that the three years limit is a hard time limit. A day late, and you won't recover.
 
Hello,
I am new to this. I received severance pay from a medical discharge in May 07. I was awarded 0% from the VA.

My W2 shows a total of wages that includes my severance pay. Do I file my W2 just like normal? Do I have to file an "amend return" along with my normal return?

DFAS told me to fax them my DD 214, PEB Cert, VA award and a letter to FMARA claiming non taxability IAW ST. Clair VS. United States District Court.

Do I file a normal return with the W2 and also submit an "AMEND" return?


My question is do I just file my return with my W2 that has my severance pay included and wait for the IRS to send me my return? If this is the case then my federal withholding and total wages include my severance pay which should not be included in my normal return.
 
It would depend on if you want to wait for DFAS or not. I am still waiting for my VA rating, so I went ahead and filed my taxes, and will do an ammended return later. Partly because I feel that between the VA and DFAS I won't have everything done by April 15th, but that is just me.
If you want part of your money now and part later, file now and then do the ammended return.
 
I also have a question that is related to this. I was discharged and awarded severance pay in 2007. I also received my VA rating and forwarded all the info to DFAS. I then received my tax back from DFAS. Now I have received my W-2 from DFAS and it lists my severance pay as regular wages. Is this right? According to all the law I have been reading, my rating from the ARMy and VA should entitle me to this lump sum being tax free. Do I need to contact DFAS for a different W-2? If they do not issue corrected W-2s, how do I show the IRS that this income was tax free on the 1040 forms?

-Christoph73
 
Does the VA RO have a rep who can help with tax questions like this for you?

A first class I was working with got out with with severance pay. He told me taxes would be withheld like it was normal pay.

When I went to TAP class the VA rep said the VA wouldn't pay you until your after-tax severance pay had been recovered. I also take that to mean taxes are withheld from severance pay.

If you can't find the answers you need, call around to local tax offices like H&R Block and see if they'll offer advise over the phone.
 
christoph73 said:
I also have a question that is related to this. I was discharged and awarded severance pay in 2007. I also received my VA rating and forwarded all the info to DFAS. I then received my tax back from DFAS. Now I have received my W-2 from DFAS and it lists my severance pay as regular wages. Is this right? According to all the law I have been reading, my rating from the ARMy and VA should entitle me to this lump sum being tax free. Do I need to contact DFAS for a different W-2? If they do not issue corrected W-2s, how do I show the IRS that this income was tax free on the 1040 forms?

-Christoph73
Click to expand...

Same issue with me. I also have the tax back from DFAS but then I receive a W-2 that includes the severance pay in block 1 and almost no federal withholding paid. I was medically discharged in February 07 and received my VA rating of 20% in April. Got the taxed severance pay back in October and was told I would receive a corrected W-2. When I got it in January the only thing that was reduced on the W-2 was the amount of Federal withholding tax, social security, and Medicare. Still shows all the wages to include the severance pay in block 1.

To make a long story short now I'm really screwed! It looks like I made $54,000 (in just one month) and only paid $924 in federal withholding. The Soc. Security and Medicare only show $4,001 as being taxable (blocks 3 & 5). Shouldn't blocks 1, 3, and 5 all match?
 
I don't think you are screwed. I am by no means a tax guru and you need to consult a tax advisor if you are unsure of how to file. But I am thinking that the $4001 is your taxable amount. They won't reduce the amount paid on the W-2, only the taxable amount. If you meet the requirements discussed in the info paper in the original post, you should not have to pay taxes on the severance pay amount. You can address it when you file your taxes.
 
I just got my VA letter with my ratings last week and took everything into the local IRS office and made them go through it, and make sure that everything is straight. Since I had already filed my taxes, I am doing an ammended return. I guess I'm lucky in the fact that I am in a military community and the IRS office here see this alot. DFAS told me that they wouldn't issue a corrected W-2 from 07. If you have any doubts, just go to Internal Revenue Service website and find your local office.
 
My accountant says they should have put the non-taxable amount in the codes section with a "P" code for the amount of my disability severance pay. Since I also live in a military community I think I'll look up the local IRS here and see what they can tell me. Thanks for the advice!
 
Got in touch with DFAS today... They said it was a computer glitch and my W-2 was incorrect and they would correct it and send me a new one. They said I should have it in about two weeks... so I should expect this around what... Christmas time? :)
 
I was released on 04/2006 and I recieved a severance pay and was taxed also I just got my moneys that was taxed 2wks ago it took me almost 1yr 6mon to get that money. Now Im trying to get my money from the state of california Im wondering if nayone could help me with the St claire letter I need it to recieve my state tax. Also my w-2 was all screwed up but DFAS wouldnt help me If you have any questions email me at [email protected]
 
cstrawser said:
Jason,

When I called IRS, they act like they have no idea of what I am talking about. Any idea of who to talk to there.
Click to expand...

I'm in the same boat. I got out in mid may. Received my va disability rating near the deadline for submitting the paperwork to dfas so now I'm in the struggle of finding how to properly submit the information to the IRS. I called the IRS they said that DFAS should submit a corrected W-2.. if not then I should file a w-2 complaint against them? I called DFAS told them what the IRS said, and they told me to call back and speak to the manager of the IRS department and gave me a publication number to quote at them. I called back and the IRS stated that there wasn't any further information they could provide. I went to H&R block to hopefully get it taken care of by professionals, and they said they had no idea..

Gotta love the endless loops and the holding music.

I still have no idea what to do. One time I called DFAS to ask for a corrected w-2 the person told me to talk to a local IRS advocate. I contacted the IRS advocate, they told me that they don't know what "issue" I have.. as far as they see there is no issue since the taxes haven't been filed yet. I stated that I don't know how to file them and they said we dont' help with filing taxes. We just help with corrections after taxes are filed.
 
Did you try the steps outlined in the Information paper? If not, I suggest you try that. Please let us know any follow up questions. Best of luck, I hope you get your taxes refunded promptly.
 
Jason said:
Did you try the steps outlined in the Information paper? If not, I suggest you try that. Please let us know any follow up questions. Best of luck, I hope you get your taxes refunded promptly.
Click to expand...


I found that document at a different url, this document gave me some of the numbers to try and get a hold of someone to figure out if anyone knew what they were doing.
[I got it at http://pom-ima.monterey.army.mil/si...taxes/Disability Severance Pay Tax Refund.pdf]


Anyways, been there done that(I believe). There is still the need for a corrected w-2. Which DFAS said they won't give me until after I am refunded the money? Since it's past the Dec. 31 deadline.
 
Okay, let's back up for a second.

Did you qualify for tax-free status initially or after getting a VA rating? Did you submit the request packet to DFAS as outlined in the Info paper (with cover letter and enclosures)?
 
Jason said:
Okay, let's back up for a second.

Did you qualify for tax-free status initially or after getting a VA rating? Did you submit the request packet to DFAS as outlined in the Info paper (with cover letter and enclosures)?
Click to expand...

Yes I qualified, I got 40% disability rating from VA. 0% disability with severance from Army. Got out mid May. Got my VA disability rating end of December. Was due to DFAS by Dec.31 therefore I'm unable to file it with DFAS and have to do it with the IRS. Now they are saying that they won't send me a corrected W-2.
 
Did you submit any of the sample letters in the packet?

If after submitting the correct letter you get no response, I think you need to talk to a tax professional. It appears to me that you could simply file your taxes, claiming the taxed amount of severance pay as an overpayment. But, if you aren't sure about this, I would talk to a CPA.
 
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