The Internal Revenue Service is reminding veterans who received disability severance payments after 1991 and claimed it as income that time may be running out to claim their refund.
Veterans should take action soon if they received a notice (letters 6060-A and 6060-D) and have not already filed Form 1040X, Amended U.S. Individual Income Tax Return, to claim a refund or credit of the overpayment attributable to the disability severance payment should do so soon.
“We appreciate the service and sacrifice of our nation’s combat-injured veterans, and the IRS is pleased to help deliver refunds under this special provision,” said IRS Commissioner Chuck Rettig. “Time is running out this month for many people who qualify for this refund. We urge combat-injured veterans to take time review the provisions to see if they are eligible.”
The Combat-Injured Veterans Tax Fairness Act of 2016 provides that most veterans who received a one-time, lump-sum, disability severance payment when they separated from military service are entitled to a refund if that payment was claimed as income. The payment must have been received after Jan. 17, 1991, and before Jan. 1, 2017. Eligible veterans should have received a mailed notice from the Department of Defense in July of 2018 explaining how to claim their tax refunds.
Some Veterans Have Yet To Act
Deadlines are soon approaching as the time available for claiming these tax refunds is limited to:
- One year from the date of the Department of Defense notice, or
- Three years after the due date for filing the original return for the year the disability severance payment was made, or
- Two years after tax was paid for the year the disability severance payment was made.
Veterans claiming their refund have the normal limitations period for claiming a refund or one year from the date of their letter from the DoD, whichever expires later. As taxpayers can usually only claim tax refunds within three years from the due date of the return, this alternative time frame is especially important since some of the claims may be for refunds of taxes paid as far back as 1991. While many veterans have claimed their refunds in the past year, many others have not, and time is running short.
Two Options For Claiming The Tax Refund:
- Option 1: File a claim based on the actual amount of the overpayment attributable to your lump sum disability severance payment, or
- Option 2: Choose to claim the standard refund amount listed below that corresponds to the year the disability severance payment was made.
The standard refund amounts are:
- $1,750 for tax years 1991 – 2005
- $2,400 for tax years 2006 – 2010
- $3,200 for tax years 2011 – 2016
Eligible But Never Received A DoD Notice
Veterans who did not receive the notice from the Department of Defense and received a disability severance payment after Jan. 17, 1991, that was reported as taxable income, can still file a claim. Veterans should contact the National Archives, National Personnel Records Center, or the Department of Veterans Affairs to obtain the required documentation for submission.
The IRS has posted detailed information on IRS.gov. Veterans with questions about claiming a tax refund for disability severance payment, can call the IRS toll free at (833) 558-5245 ext. 378 between 7 a.m. and 7 p.m. local time (Alaska and Hawaii follow Pacific time).
Ask about our new client promotions today!
At Horizon Expat Tax we are happy to provide the following quality services:
- U.S. Tax services for taxpayers worldwide
- U.S. Tax services for U.S. non-resident with U.S. reporting requirements (temporary U.S. work, U.S. rental property, etc)
- U.S. Tax services for individuals immigrating to the U.S.
- Small business tax compliance, advisory, and bookkeeping services
Contact Us Today
Any tax advice herein is based on the facts provided to us and on our interpretation of tax legislation as it reads at the time the advice is provided. Tax law is subject to continual change, at times on a retroactive basis and may result in incremental taxes, interest or penalties. We are not responsible for updating our advice for changes in law or interpretation after the date the advice is provided. Every tax situation is different. We are not responsible for the tax implications to any individual or entity that may act on this advice.