Before we continue with the third installment of our newsletter we would like to let everyone know that our office location is moving as of August 1, 2018.
Our new address will be:
Hughes Szuberla CPAs, APC
206 N. Coast Hwy #310
Oceanside, CA 92054
In order to complete the move and set up the new office, we will be closed the week of July 30th. We will respond to any emails as soon as possible. However please expect a delay in our responses until the office is back up and running.
As a reminder for those who have not filed their 2017 returns yet, the extended 2017 due dates are the following:
- S corporations and partnerships: September 17, 2018.
- Individuals and C corporations: October 15, 2018.
Feel free to send your information to us early so we have plenty of time to finalize and file!
Refund Opportunity for Disability Severance Payments
In 2016, the US Congress passed Combat-Injured Veterans Tax Fairness Act. As a result of this new law, the IRS and Department of Defense began working together to identify US Military veterans who would qualify for income tax refunds.
On July 11, 2018 the DoD began issuing letters to US Military veterans who received a one-time lump-sum disability severance payment when they separated from their military service. The letters from the DoD include information explaining how to claim tax refunds they are entitled to. The refund opportunity may apply to certain US Military veterans who received disability severance payments after January 17, 1991, and paid income tax on that disability severance payment.
Amount to Claim
Veterans can submit a claim based on the actual amount of their disability severance payment by completing Form 1040X. However, there is a simplified method. Veterans can choose instead to claim a standard refund amount based on the calendar year (an individual’s tax year) in which they received the severance payment. The standard refund amount by year is listed below:
- $1,750 for tax years 1991 – 2005
- $2,400 for tax years 2006 – 2010
- $3,200 for tax years 2011 – 2016
Claiming the standard refund amount is the easiest way for veterans to claim a refund, because they do not need to access the original tax return from the year of their lump-sum disability severance payment.
Statute of Limitations
The amount of time for claiming these tax refunds is limited. Veterans making these claims have the normal limitations period for claiming a refund: 3 years from the filing of the return. However, the law grants veterans an alternative timeframe – one year from the date of the letter from DoD. This alternative time frame is especially important since some of the claims may be for refunds of taxes paid as far back as 1991.
Veterans eligible for a refund who did not receive a letter from DoD may still file Form 1040X to claim a refund but must include both of the following to verify the disability severance payment:
A copy of documentation showing the exact amount of and reason for the disability severance payment, such as a letter from the Defense Finance and Accounting Services (DFAS) explaining the severance payment at the time of the payment or a Form DD-214, and
A copy of either the VA determination letter confirming the veteran’s disability or a determination that the veteran’s injury or sickness was either incurred as a direct result of armed conflict, while in extra-hazardous service, or in simulated war exercises, or was caused by an instrumentality of war.
Veterans who did not receive the DoD letter and who do not have the required documentation showing the exact amount of and reason for their disability severance payment will need to obtain the necessary proof by contacting DFAS.
If you have specific questions about your Disability Severance Payment Refund Claim or would like us to prepare your Form 1040X, please contact us.
Thank you! We look forward to serving you again in the future!