Under federal law, veterans who suffer combat-related injuries and who are separated from the military are not supposed to be taxed on the one-time lump sum disability severance payment they receive from DoD. However, for years DoD improperly withheld taxes on these payments from thousands of qualifying veterans, who were typically unaware that their benefits were being improperly reduced.
To correct this injustice, in 2016 Sen. Warner introduced and passed the Combat-Injured Veterans Tax Fairness Act instructing DoD to identify veterans who have been separated from service for combat-related injuries and had taxes improperly withheld from their severance payments. The bill required DoD to determine how much these veterans are owed so they can recover the withheld amounts, and notify them of their eligibility. Eligible veterans will now have a year after they receive the notice from DoD to file a claim for the refund.
“These are veterans who were wounded in service to our country, but because of Pentagon bureaucracy, many of them were robbed of money that they had earned through their service, payments that were intended to help them transition into civilian life. They deserved better. I am glad that our legislation has kicked-off the process to restore these improperly withheld taxes,”said Sen. Warner. “I encourage those Virginians who receive letters to promptly file for a refund, and my office stands ready to assist.”
“More than 133,000 disabled veterans may be eligible for a refund of federal taxes under the Combat Injured Veterans Tax Fairness Act. I urge all veterans who receive the notification letter to follow the instructions for filing an amended tax return to receive the refund. I thank Congress for taking up this matter and passing legislation to return improperly withheld federal taxes to these deserving disabled veterans,” said Mike Boehme, State Commander, Department of Virginia, Veterans of Foreign Wars.