Combat-Injured Veterans Tax Fairness Act of 2016

  • Published
  • By 55th Wing Legal Office
  • 55th Wing Legal Office

On Dec. 16, 2016, the president signed into law the Combat-Injured Veterans Tax Fairness Act of 2016, which provides eligible veterans the right to seek a refund for taxes they may have paid on Disability Severance Pay. 

Most veterans who claimed the disability severance payment as income and received a one-time, lump-sum, payment when they separated from military service are entitled to a refund. 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 2018 explaining how to claim their tax refunds.

The IRS 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.  The time-frame for claiming these tax refunds is limited to the later of: 

  • One year from the date of the DOD notice
  • Three years after the due date for filing the original return for the year the disability severance payment was made
  • Two years after tax was paid for the year the disability severance payment was made

If they received a notice (letters 6060-A and 6060-D) and have not already filed an amended tax return, veterans should take action soon to claim a refund or a credit of the overpayment attributable to the disability severance payment.

Veterans who did not receive the notice from the DOD, and received a disability severance payment after Jan. 17, 1991 that was reported as taxable income, can still file a claim.  They must include the necessary documentation to file with their Form 1040X.  Veterans should contact the National Archives, National Personnel Records Center, or the Department of Veterans Affairs to obtain the required documentation for submission with their Form 1040X. 

The IRS has posted detailed information on 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.

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