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Combat Injured Veterans May be Due a Refund

Information for Congressional Staff

From IRS Legislative Affairs Division

Congressional Affairs Program

Topic:  Combat Injured Veterans May be Due a Refund

Who it affects: Combat Injured Veterans Who Received a Lump Sum Disability Payment Inadvertently Treated as Taxable

Key points:

Please share the following information with veterans and veteran’s groups in your district.

From 1991 through 2016, approximately 130,000 combat injured veterans received disability severance payments that were inadvertently treated as taxable.

In response to the Combat Injured Veterans Tax Fairness Act, in July of 2018 DoD issued a letter to eligible veterans advising that they may be due a refund. On July 11, 2018, IRS issued a news release advising that eligible veterans owed refunds attributable to disability severance payments should file amended returns for the year in which they received the payment to claim tax refunds.

Veterans have one year from the date of the DoD letter (until July 2019), or three years from the due date of the return, whichever is later, to claim the refund. Eligible veterans have two options:

1.      Use a simplified method to claim a standard refund amount. This method doesn’t require them to have the original tax return or contact the IRS to obtain information from the tax return.

2.      Or, veterans can submit a refund claim based on the actual amount of their disability severance payment by completing Form 1040X, carefully following the instructions for Form 1040X.

To help ensure that no combat injured veteran gets left behind, IRS sponsored Volunteer Income Tax Assistance sites can help eligible veterans claim their tax refund using the simplified method during the upcoming filing season.

The simplified method is easy and 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

Some, not all, VITA sites will be able to help eligible veterans claim a refund based on the actual amount of their disability severance payment. Claims based on actual amounts paid may be larger or smaller than the standard refund amounts.

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