In 2016 The Combat-Injured Veterans Tax Fairness Act was passed.  This affects veterans who received disability severance payments after January 17, 1991, and included that payment as income. The DOD is just beginning to send out letters to veterans, but what should you know before filing?

There is a time limit on filing for the claim. Veterans filing for the claim have the normal limitation period for claiming a tax refund, or they can claim it one year from the date of the letter from the DOD. whichever is a later time period.

There are a couple of ways to file for the claim, but one might have a larger return than the other. The simplified method of filing is to claim a standard refund amount based on the calendar year in which the veteran received the severance payment. They would then write “Disability Severance Payment” on line 15 of Form 1040X and enter on lines 15 and 22 the standard refund amount listed below that applies:

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

The second way to file might yield more of a refund because the veteran would send in a claim based on the actual amount of the disability severance payment received by filing out Form 1040X. When filing this form veterans must carefully follow the instructions or risk having their refund delayed or denied.

For more information about the Combat- Injured Veterans Tax Fairness Act visit:

https://www.irs.gov/individuals/military/combat-injured-veterans-tax-fairness-act-claim-information-available