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Old 07-21-2018, 11:18 AM
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Exclamation 130,000 veterans are about to get a hefty tax refund

130,000 veterans are about to get a hefty tax refund
Published: July 21, 2018 8:24 a.m. ET

Some veterans who have received disability payments may want to keep an eye out for mail from the Department of Defense — there could be money in it for them.

Veterans who left the military because of combat-related injuries between 1991 and 2016 may have been wrongly taxed on their one-time lump-sum disability severance pay, even though Congress deemed that money nontaxable. Now, thanks to the Combat-Injured Veterans Tax Fairness Act of 2016, the Department of Defense has identified more than 130,000 veterans who are eligible for a refund and is sending them notices between July 9 and July 20 to notify them.

To get the refund, veterans must file an amendment to the tax return from the year they received the disability severance payment. They have one year to file.

Veterans can submit a claim based on the actual amount of their disability severance payment, or they can take a set amount determined by the year they received that payment, according to the IRS.

For tax years 1991 to 2005, that figure is $1,750; for tax years 2006 to 2010, it’s $2,400; and for tax years 2011 to 2016, it’s $3,200. Claiming the standard refund may be easiest for veterans who do not have access to their original tax return from the year of the severance payment, the IRS noted. If a veteran did not receive a notice from the Department of Defense, but received a payment that was taxed, they can still file a claim, but must provide documentation.

More information from the IRS is here. RE:

Many veterans likely didn’t expect to see that money, said Spencer Reese, who is on active duty in the U.S. Air Force and runs the Military Money Manual blog, but it could help them set up an emergency fund, pay off credit-card debt, supplement the GI bill for education costs, or reach other financial goals. “Probably the most pressing concern for most veterans getting out of the military is this question of what’s next,” Reese said. For many servicemembers, that means going back to school or trying out new careers.

Transitioning to civilian life isn’t always easy, and veterans may face significant financial challenges. In some scenarios, veterans may fall into debt because their salaries are modest (U.S. Army soldiers make an average of $47,000, according to a Data USA analysis of U.S. Census data), they’ve incurred extra expenses due to moving frequently or, because their guaranteed pension paychecks post-service give them easy access to credit, according to mortgage lender Veterans United.

Veterans are 40% more likely than civilians to be underwater on their homes and 28% more likely to have made a late payment on their home in the last year, according to a 2017 Financial Industry Regulatory Authority study. They may also be a prime target for loan sharks.

“Military people are vulnerable to exploitation by people who want to sell them stuff or manage their money or try to provide some service,” said Steve Mannell, chief financial officer of AAFMA Wealth Management, a financial planning firm for military members. “They know they’re going to get repaid because they know [veterans] are getting a paycheck.”

Veterans just out of the military can also have trouble applying for new jobs, as they’ll have to recreate a resume and brush up on interviewing and networking, which they may not have done for years, according to Veterans Enterprise, a network for former servicemembers. A critical step to adjusting to civilian life is creating a new budget, which should incorporate new expenses such as retirement savings and health insurance replacement. “Reintegration has to be deliberately planned,” Mannell said.

O Almighty Lord God, who neither slumberest nor sleepest; Protect and assist, we beseech thee, all those who at home or abroad, by land, by sea, or in the air, are serving this country, that they, being armed with thy defence, may be preserved evermore in all perils; and being filled with wisdom and girded with strength, may do their duty to thy honour and glory; through Jesus Christ our Lord. Amen.

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