The Combat-Injured Veterans Tax Fairness Act of 2016 is a law that may allow many combat-injured veterans to claim a refund or credit from the IRS. This article is brief summary of who may be eligible, and how to find help and more information.
How do I know if I qualify?
Under this law, you may qualify for a refund of income tax paid to the IRS if:
- You were separated from service because you were injured in combat or war exercises
- You got a lump-sum disability severance payment between 1991 and 2016
- You paid income taxes on that disability severance payment
The Department of Defense sent letters in July, 2018 to veterans who may qualify for a refund of income taxes paid on these disability severance payments - but not every veteran who qualifies got a letter.
How much are these refunds?
It depends on the year you got the severance payment, and how much income tax you paid. The refund amount could be from $1,750 to $3,200 or more.
How can I claim this refund?
You will need to follow the instructions in the letter you got from the Department of Defense to claim this refund. You can learn more about that process on the IRS website.
If you did not get a letter from the Department of Defense, but believe you qualify, you can still file a claim. The IRS page on this law has information about how to file a claim if you did not get a letter from the DoD.
Either way, you may want to get help from a tax professional. If you live in Maine, contact your local PTLA office and we may be able to help you through our Low Income Taxpayer Clinic.The IRS maintains a listing of Low Income Taxpayer Clinics by state - go here to find a clinic in your area!
There is a time limit for claiming this refund. From the IRS:
"You must mail the claim generally by the later of:
- 1 year from the date of the Department of Defense notice, or
- 3 years after the due date for filing the original return for the year the disability severance payment was made, or
- 2 years after tax was paid for the year the disability severance payment was made."
To read more about this law from the IRS, visit their page: Combat-Injured Veterans Tax Fairness Act Claim Information Available
Most states have Low Income Taxpayer clinics. They may be able to help you with
- understanding if you are covered by this law
- claiming this new credit, if you qualify
If you live in Maine, contact your local PTLA office and we may be able to help you through our Low Income Taxpayer Clinic.
If you live outside of Maine, the IRS maintains a listing of Low Income Taxpayer Clinics by state - go here to find a clinic in your area!