If you’re a veteran who received disability severance pay after January 17, 1991, you may qualify for a special federal tax refund. In February 2018, the Department of Defense (DOD) has started notifying over 133,000 veterans who may have been wrongly taxed as far back as 27 years ago.
Refunds totaling an estimated $78 million in wrongly withheld taxes will be paid in accordance with the 2016 Combat Injured Veterans Tax Fairness Act. This law ensures veterans suffering service-ending combat-related injuries aren’t taxed on the one-time lump-sum severance payment they received from the DOD.
According to the National Veteran’s Legal Services Program (NVLSP), the Department of Finance and Accounting Services incorrectly withheld about $78 million in taxes from veterans’ disability severance pay. The amount of individual refunds will vary based on rank and years of service, but it’s estimated some veterans may have been taxed as much as $11,000.
The DOD is notifying eligible military veterans by mail. Veterans have one year from time of notification to file a claim. Notification includes the amount of taxes improperly withheld and instructions for filing an amended tax return to recover money owed the veteran.
If you need help filing an amended return or doing your regular taxes, contact Military One Source or call 1-800-342-9647. You may also qualify for tax preparation assistance through the Volunteer Income Tax Assistance (VITA) program. Find a VITA site near you.