Military retroactive medically retired me and received lumpsum backpay this year. This reducing my child tax credit from $2000 down to $500. How can I change this?

Forum|Forum|6 years ago
June 4, 2019
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Medical retirement pay from DFAS lumpsum

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Carl11_2

Was this retroactive retired pay? Or was it retroactive Veterans Disability Pay? It matters.

lisa-moonAuthor

Retroactive medical retirement pay from DFAS. Medically retired at 30 percent back to 2004.

tyboch1329

I'm looking into applying for retroactive medical retirement as well! What branch were you in and was it a painful process? I got out of the Marine Corps in 2019.

Carl11_2

I'm looking into applying for retroactive medical retirement as well!

Contact your nearest VA office, as this is not a simple process. They can help you with this.

https://www.va.gov/find-locations/ and look for VA Benefits as well as Vet Centers.

Carl11_2

My apologies, but I can interpret that several ways. DFAS does not pay VA pay. Do you have a letter that basically states you can now consider a percentage or specific amount of the pay you received from DFAS as VA pay, or tax exempt by treating it "as disability pay"? Just trying to confirm, because there is a specific procedure for such a situation. I experienced it myself a few years back.

lisa-moonAuthor

I already receive vs disability since originally being medically separated from the army. Recently, DFAS changed the seperation to medical retirement. This past year I received a lumpsum of backpay going back to 2004. I now receive retirement pay monthly from DFAS, reduced by amount I receive as disabilty pay from VA monthly.

lisa-moonAuthor

So yes, DFAS states the amount that is VA waiver on the monthly statement.

lisa-moonAuthor

The problem is that the lumpsum pushes my total income to a much higher amount that then reduced my child tax credit this year for 2 kids by 1500.

Carl11_2

Ah okay. The procedure you need to follow is at https://www.irs.gov/individuals/military/special-tax-considerations-for-veterans

Note that you will have to mail your return this year in order to do this. If it's retroactive back to previous year or years, then you'll need to file an amended return for each year. Note that it's important to mail each return in it's own separate envelope too, per IRS guidelines.

lisa-moonAuthor

Thanks for your help but the link you included doesn't seem to apply to my situation. My percent from VA is the same. The taxing of the backpay from DFAS is not in question. I'm just not sure how to not have the child tax credit reduced because the extra lumpsum payment artificially inflated my income for last year.

quinatac

Lisa-Moon,

A bit off topic, but how did you get your medical retirement back pay? I was medically retired back in 1992 with 70% DOD disability but I don't get retired pay or retired benefits.

Thanks in advance,