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January 28, 2020
Question

Disability Severance Pay received in 2019

  • January 28, 2020
  • 1 reply
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I'm not sure why, but my last post was marked as spam.  I would appreciate some assistance with this rather being called spam.

 

This past year (2019) I receieved Disability Severance Pay in a lump sum that the VA taxed up front.  I failed to properly read the documentation that said the VA would return the taxed money to me if I claimed it before the end of the year due to being 90% disabled, and because the VA will recoup the money out of my disability pay.  So now I have to figure out how to claim this on taxes so that I can receive the full amount that was paid to the IRS back so that I don't come out of pocket when the VA recoups the money.

 

I have seen that in 2016 the law was changed so that this money should not be taxed anymore, and since I was rated for disability in 2016, and paid disability severance pay in 2019, I believe the VA made an error in taxing the money.  There is also the DFAS instructions at https://www.dfas.mil/dsp_irs.html that only refers to past occurences and how to ammend a return via a 1040x.

 

All the same, I need to recoup the money from the IRS so that the VA can recoup the money from me.

 

I attempted following the directions that were posted here from another user that said to put in the full severance pay as a negative number in other reported income, however that only calculated roughly half of the money that was paid to be returned to me.  There was no way, that I saw, to claim what was paid, only deducting the full amount from my income.

 

I called TurboTax support, but unfortunately the lady that assisted me only found the community thread mentioned above and had no other help for me.

    1 reply

    February 1, 2020

    If they treated the severance pay as taxable then you should have gotten a 1099-R which lists the amount of severance pay and the taxes withheld. You would enter the 1099-R as shown below and put in the full severance pay as a negative number in other reported income. If you didn't get a 1099-R you might want to check with the VA or DFAS.

     

    1. Login to your TurboTax Account 
    2. Click "Federal" from the left side of your screen
    3. Click "Wages & Income" on the top
    4. Scroll down and click "Start or Edit/Add" next to "IRA, 401(k), Pension Plan Withdrawals (1099-R)
    5. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
    6. Click "I'll Type it Myself"
    7. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
    8. Click "Continue"
    9. From here TurboTax will walk you through entering your Form 1099-R
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