Active Duty Severance Tax Recoupment

Forum|Forum|6 years ago
January 16, 2020
1 reply
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Hello,

My wife was discharged in July of 2016 from the Army with a 10%/60% (Army/VA) rate. She received her severance, which was around $12,000 or so, but the total was taxed down from ~$18,000. The way I understand it, she is now eligible to her remaining $6,000 due to her VA rating.

We sent the IRS to 1040X with all the info last year when we learned about this rule, but never received anything back. I called their hotline and checked for the 1040 but it didn't find it. Have we just lost the money now due to the three year rule? All of this is very confusing, especially since we never received the VA letter or anything since we moved the same month she discharged.

DanaB27

No, you haven't lost the money since with the regular IRS amendment rules you have until April 15th, 2020 to file an amended return for your 2016 tax return. Furthermore, the law grants veterans an alternative time-frame - one year from the date of the letter from DoD.

"Generally, to claim a refund, you must file Form 1040-X within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. Returns filed before the due date (without regard to extensions) are considered filed on the due date, and withholding is deemed to be tax paid on the due date" (IRS Tax Topic 308 Amended Returns).

You can find information on how to request a DOD letter on the DFAS website.

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