TaxMama’s Tax Quips Special Refunds for Disabled Vets

Today TaxMama® wants to tell you how disabled vets might be eligible for IRS tax refunds going back as far as 1991. Unbelievable? But true!

 

 

 

Dear Friends and Family,

We all know that you cannot get IRS refunds if you file for them more than 3 years after the tax return was filed (or was originally due, if unfiled). So why can you suddenly go back over 25 years to get these refunds approved?

Well, it turns out that the Combat-Injured Veterans Tax Fairness Act that was passed in 2016 makes all this possible. The IRS worked with the Veterans Administration to craft a letter to veterans who received a lump sum disability check when they separated from service. IRS withholding was taken from those checks – but the benefits should not have been taxable.

Veterans who receive that letter need to take action immediately. You have 12 months to file an amended return to claim your refund. (It’s not clear if the IRS will also be paying interest on refunds for taxes that were withheld a decade or two ago.)

There are two ways to claim your refund:

1) Find your original tax return and the information showing how much was withheld from your compensation. Then you can claim the full amount.

2) Or if you cannot find that information, the IRS has a schedule of refunds you can claim, by year:

  • $1,750 for tax years 1991 – 2005
  • $2,400 for tax years 2006 – 2010
  • $3,200 for tax years 2011 – 2016

It is in your best interest to find the actual information. Why?

Kathy A. Bylkas, an EA in Colorado just filed a claim for one of her clients this week. He had received a severance payment 2014. The refund she got him was over $10,000. That’s more than 3 times the 2011-2016 amount the IRS is willing to issue if you have no data.

How do you get these refunds? Simply file a Form 1040X for the year in question and write “Disability Severance Payment” on line 15 of Form 1040X and enter on lines 15 and 22

Then follow the special instructions to mail these specific refund requests to a specific mail STOP address on the IRS campus in Kansas.

What’s if you didn’t get the letter from the VA? That’s OK. But you will have to dig up two documents to prove that you were discharged for service-related disability and the payment information. You may well be able to get these docs from the the Defense Finance and Accounting Services (DFAS).  IRS spells out the details in the special instructions link – just scroll all the way down. Although this may be difficult, it will be worth the effort. By locating the actual documents, you are likely to get the higher refund amount. So, please, do it quickly!

To make comments please drop into the TaxQuips Forum.

 

And remember, you can find answers to all kinds of questions about tax and business issues, free. Where? Where else? At www.TaxMama.com.

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