The IRS issued guidance in July, 2018 regarding the Combat-Injured Veterans Tax Fairness Act that was passed in 2016.
Veterans that received one-time lump-sum disability severance payments may receive a letter that they can amend prior year returns to claim a tax refund if those payments were included in their taxable income in the year they were received. The Disability Severance payment may be from as far back as 1991.
Veterans have one (1) year from the date of the letter they received from the Department of Defense (DoD) to file an amended return or three (3) years from the due date on the return, whichever is later.
To file an amended return, veterans can use the actual return and complete form 1040X based on the payment received. The 1040X form for prior year returns can be found on the IRS website. The return will need to be completed by hand (for years after 2014, you may log into your account and create the amended return) and mailed to the IRS.
If you are not able to access the actual return, or choose not to, the IRS has also provided veterans with a simplified method of filing an amended return.
The IRS instructs veterans to:
- Print out the 1040X form for the year they need to amend
- Write "Disability Severance Payment" on line 15 of form 1040X
- Enter the amount of the standard refund amount shown below on line 15 and 22.
- Write either "Disability Severance Payment" or " St. Clair Claim" on the top of the amended return form
- Include a copy of the DoD letter
If you did not receive a DoD letter, include both a
- Copy of the documentation showing the exact amount of and reason for the disability payment
- Copy of the VA determination letter
If you are not able to provide the DoD letter or required documentation, contact the Defense Finance and Accounting Services , National Archives, National Personnel Records Center or Department of Veterans Affairs.
Simplified Method Amounts
Tax years 1991 - 2005 $1,750
Tax years 2006 - 2010 $2,400
Tax years 2011 - 2016 $3,200
Mail the amended return to:
Internal Revenue Service
333 W. Pershing Street Stop 6503, P5
Kansas City, MO 64108
For more information, see