Thanks to a ‘fairness act’ filed in 2016, hundreds of thousands of veterans are eligible to receive significant refunds for their disability severance pays distributed since the 90s, some up to several thousand dollars.
“Under existing federal law” disability severance pay, or DSP, is not to be taxed if one of the following conditions exist:
“The DSP is paid for combat-related injuries determined by the military service at the time of separation,” or if “the veteran is eligible for disability compensation from” the U.S. Department of Veteran Affairs.
However, since Jan 17, 1991, disabled vets outrageously had such compensations taxed nonetheless.
In perhaps one of his only attempts to defend the nation’s veterans, former president Barack Obama signed the Combat-Injured Veterans Tax Fairness Act of 2016 which “mandate[ed] the [Secretary of Defense to] stop improperly taxing severance payouts for troops wounded in war zones and requires Pentagon officials to identify any veterans whose benefits were improperly taxed.”
Beginning on July 9, it began to do as, alerting 130,062 disabled veterans or their surviving families that they are now eligible to receive tax refunds of at least $1,750.
“If all those eligible file claims,” the DoD is facing an estimated $228 million that associated veterans rightfully deserve.
There are several ways in which those eligible can file such a claim.
If one received a letter, then they are given “one year after the date of their letter” to claim the refund.
Those individuals are instructed to do so by filing a Form 1040X with the IRS with the notice ‘Veteran Disability Severance’ or ‘St. Clair Claim’ written and mail it, along with “a copy of the DoD notification letter,” to the following address:
Internal Revenue Service
333 W. Pershing Street, Stop 6503, P5
Kanas City, MO 64108
Any vets who did not receive a letter but believe to be deserving of a refund may also file a claim within three years if they have tax returns pertaining to the severance payment in question “or two years after the tax was paid for the year the disability severance payment was made.”
However, the IRS claimed a deadline of July 20, to which all remaining letters were to have been sent, so there very well may be notifications still pending in the mail.
Regarding veterans who believe themselves eligible for a refund but understandably do not have all of their tax documents from the past several decades, the IRS created “standard refund amounts” based on the time frame that a disabled vet received their DSP.
While actual amounts may vary depending on factors such as rank or the severity of the disability, the “simplified IRS methods” allocates $1,750 for severance payments taxed between 1991 and 2005, $2,400 for those within 2006 and 2010, and $3,200 if such occurred between 2011 and 2016.
Families of deceased veterans may also claim, with any refunds being “paid to the estate of the” individual.
Executive Director of the Armed Forces Tax Council Army Lieutenant Colonel David Dulaney explained another benefit regarding being notified of the DSP eligibility. Previously, he said that “it could take many months for the veteran to receive notification of eligibility for disability compensation.”
However, the Departments of Defense and Veteran Affairs are said to be changing policies which will now alert disabled vets “as early as months after separation” from the military.
Thankfully, these recent developments will benefit veterans who risked their lives for American freedom and defense and were, unfortunately, injured. However, it is inexcusable that such brave men and women had severance payments taxed and that it has taken this long for the situation to be corrected.
Legislators supporting the Combat-Injured Veterans Tax Fairness Act expressed how ridiculous it was that an additional law had to be implemented simply to ensure that disabled vets would receive their deserving disability severance pays.
Virginia Senator Mark Warner claimed that “Congress should not have needed to step in to ‘recover the compensation.’”
North Carolina Representative David Rouzer called the proposed act “a common-sense solution” and the associated taxation simply “unacceptable.”
Arkansas Senator John Boozman celebrated the act passing, claiming that it finally “right[s] a wrong for our veterans.”
Unfortunately, this does not remedy the situation for military personnel who died in combat or otherwise after their service, yet it is admirable to see action being taken to amend it as the government works to rightfully fight for America’s bravest.
Such a priority has been previously cast aside as democrats advocate for illegal immigrants and refugees when there are military veterans who desperately need support.
Thankfully, the recent steps taken to refund affected disabled veterans is fantastic news for many, countless of whom will surely benefit from it.