Disabled Veterans may be due federal income tax refunds for taxes they paid on one-time, lump-sum disability severance payments (DSP). 

Disabled Veterans may be due federal income tax refunds for taxes they paid on one-time, lump-sum disability severance payments (DSP). 

During July of 2018, the IRS mailed letters on behalf of the Department of Defense (DoD) notifying affected veterans of their eligibility to file a claim with the IRS for a refund or credit of an over-payment attributable to the DSP. The deadline to file for the refund is one year from the letter’s date.

Veterans who did not receive the letter and estates or surviving spouses of veterans also may be eligible. Veterans may claim the standard refund or may pursue a refund based on proof of the actual amount of DSP.

Click here for more information through the Defense Finance and Accounting Service.

Click here for more information through the the Internal Revenue Service.

The Combat-Injured Veterans Tax Fairness Act of 2016-Veteran’s Disability Compensation for Veterans Separated due to Medical/Disability, the Internal Revenue Manual (IRM) 21.6.6.4.20.2  and/or by calling the IRS at (833) 558-5245.