Over 130,000 injured vets are owed big tax refunds
August 08, 2018
For 25 years, a computer glitch at the Department of Defense taxed non-taxable disability severance payments, resulting in hundreds of thousands of veterans overpaying their taxes.
The disability payments to veterans injured in combat are tax-free. However, the Defense Department’s automated payment system did not distinguish those payments from taxable income between 1991 and 2016 and withheld its standard 20-25 percent from the pay. The government is working to issue refunds of $1,750 or more to the affected veterans or their survivors.
The nonprofit advocacy group National Veterans Legal Services Program (NVLSP) first discovered the error. U.S. tax law usually does not permit taxpayers from seeking refunds more than three years past the tax filing date, but after NVLSP found the mistake it looked to sue the government. Instead of a lawsuit, to correct the oversight, Sen. Mark Warner, D.-Virginia, and Sen. John Boozman, R.-Arkansas, sponsored the “Combat-Injured Veterans Tax Fairness Act,” which went into effect in 2017. The Defense Department just recently figured out which veterans were affected and how much each veteran overpaid.
Many veterans who received a disability discharge and a disability severance payment between January 1991 and the end of 2016 have probably been affected. The Defense Department is mailing letters to notify veterans owed money.