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VA disability pay starting after DOD retirement pay?

LCDR Greg

PEB Forum Regular Member
Registered Member
I was retired to the TDRL on June 1, 2019, and I was just informed by the VA that I am 100% P&T and it is effective back to June 1st. How does this work? Will they go back and recoup my DOD pay and replace it with VA pay? I wondering because if VA disability is not taxed, how will I be able to get back all of the taxes I've paid on my retirement pay? Should I wait before filing my taxes to see how this shakes out? I know this has happened to other people, but I haven't found the answer on the board here. Any thoughts?
 

RonG

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PEB Forum Veteran
Lifetime Supporter
Registered Member
I would wait for the VA letter of award. Do you have 20 years active duty which would qualify you for CRDP?

I first wrote the following in 2012, but amended it several times. It deals with CRSC but much of the info also applies to retro VA compensation.
See Amended returns LINK <---

Your situation is a bit tricky in that the nontaxable occurred in a year for which you have not filed a tax return. I could never get DFAS to issue a corrected 1099 for the prior year.

One way to possibly do this is to file a paper return with all the associated documents including VA approval, 1099, etc. and outline of on Excel Sheet what was done and what should have been done if the approval was in real time.

Recommend you see a tax professional (not one of strip mall shops that pop up every year) for assistance. I am not a tax professional and it has been several years since I went through all the mathematical gymnastics like this case will require.

Ron
 

RonG

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PEB Forum Veteran
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Special Tax Considerations for Veterans

Disabled veterans may be eligible to claim a federal tax refund based on:

  • an increase in the veteran's percentage of disability from the Department of Veterans Affairs (which may include a retroactive determination) or
  • the combat-disabled veteran applying for, and being granted, Combat-Related Special Compensation, after an award for Concurrent Retirement and Disability.
To do so, the disabled veteran will need to file the amended return, Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040A or 1040EZ. An amended return cannot be e-filed. It must be filed as a paper return. Disabled veterans should include all documents from the Department of Veterans Affairs and any information received from Defense Finance and Accounting Services explaining proper tax treatment for the current year.

Please note: It is only in the year of the Department of Veterans Affairs reassessment of disability percentage (including any impacted retroactive year) or the year that the CRSC is initially granted or adjusted that the veteran may need to file amended returns.

Special Tax Considerations for Veterans | Internal Revenue Service <---LINK

Ron
 

LCDR Greg

PEB Forum Regular Member
Registered Member
I should have added that I'm 10 years/medically retired, so no CRDP. It could never be that simple!! I have the letter of award dated 12/24/2019. I guess I was just wondering if this will get fixed by the VA without my input, or if I need to start jumping through hoops and getting my poop in a group. After your posts, it looks like I will need to be proactive.
 

RonG

PEB Forum Regular Member
PEB Forum Veteran
Lifetime Supporter
Registered Member
I should have added that I'm 10 years/medically retired, so no CRDP. It could never be that simple!! I have the letter of award. I guess I was just wondering if this will get fixed by the VA without my input, or if I need to start jumping through hoops and getting my poop in a group. After your posts, it looks like I will need to be proactive.
I would wait on the VA award letter.

That letter might include info such as
--VA Rate
--VA amount withheld
--VA Amount paid
and other info.

There will be an audit of your retired pay and VA compensation. That will take some time. There really is not much you can do until DFAS finishes the audit.

If I was in your situation, I would ask DFAS (via AskDFAS) how 1099s are handled in such cases. As mentioned, I never received a corrected 1099. Don't be surprised by an answer such as "Huh?" Sorry...I could not resist.

What do I think will happen? I think the VA will just pay the difference between the higher VA amount and the Gross Retired pay amount. That obviously will leave a certain amount that could come under the IRS law I cited.

Good luck,
Ron
 
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