24 March Legislative News Update
weekly electronic newsletter, and is published
every Thursday when Congress is in session.
New Legislation Would Return Tax Money to Combat-Injured Veterans What was said: “The intent of Congress, federal law and Department of Defense policy are all very clear: Service members separated as a result of combat-related injuries are not to have their severance pay taxed. It’s unbelievable that Congress has to act in order to ensure that the law is followed and that veterans who have already sacrificed so much receive every penny of their severance,” said Sen. Mark Warner, D-Va.
Warner was discussing the details of a bill he and fellow senator, John Boozman, R-Ark., introduced that would ensure veterans who suffer service-ending combat-related injuries are not improperly taxed on the severance payment they receive from the Department of Defense (DoD).
What it means: By law, the one-time lump sum disability severance payment qualifying veterans receive should be tax free. However, because of a glitch in DoD’s automated payment system, taxes were taken out. Even more disturbing is the fact that DoD has been aware of the accounting problem since 1991.
Many veterans were unaware that their benefits had been improperly reduced as a result of DoD’s actions and, those that were aware, were met with shrugs from the government.
Warner and Boozman’s legislation, The Combat-Injured Veterans Tax Fairness Act of 2016 corrects the problem by directing DoD to identify the affected veterans, instructs them to determine how much they are owed and allows veterans to recover the withheld amounts.
The bill is retroactive: it will cover all those who have been medically separated with combat-related disabilities back to 1991, allowing them to file amended tax returns despite IRS rules which only allow for an amended tax return to be filed within three years.
Why it matters: A joint press release issued by Warner and Boozman provided specific examples from affected veterans. One said that the government withheld more than $11,000 from his disability severance check and another said the amount withheld from his severance was $8000.
It is estimated that over 13,800 veterans have been affected with the amount of money withheld totaling approximately $78 million.