Over 130,000 U.S. veterans are owed large federal income tax refunds from injuries they acquired during combat. The Department of Defense had a computer glitch for 25 years that was not caught until recently.
This computer glitch made it so the disability severance payments issued by the government could count as taxable income. The government is aware of the problem and is working with families to recover the money that they were rightfully owed.
How Much Is Owed?
It is estimated that these refunds could be at least $1,750 per individual with the potential of being even higher. Some are estimated to be owed over $10,000!
Since all disability payments are meant to be tax free, those who overpaid due to the glitch are encouraged to contact a Veterans Service Officer for assistance in claiming the refunds.
Normally, refund claims can only be filed up to 3 years after the event, but the government is making an exception for this case as they understand the magnitude of the error. All veterans or family members of deceased veterans can file for the refund no matter when it occurred. They believe that some veterans have already noticed the error and had it corrected on their own, but there are a lot out there who did not notice when filing.
Who Exactly Is Affected?
Veterans discharged from service between January of 1991 and the end of 2016 who also received a disability severance payment are most likely affected by this mistake, however; the monthly disability payments made by the US department of Veteran Affairs have not been impacted.
The Defense Department has sent out letters to all vets who fell under this category and included letters to family members of deceased veterans as well. Once you have received this letter, you have one year to claim the refund by getting the tax return amended.
When Will Veterans Be Notified?
These letters were mailed out on July 9th and will continue to send these notification until July 20th.
For individuals who did not receive a letter but think they are warranted a refund, they will also be able to file for an amended tax return.
The National Veterans Legal Services Program (NVLSP) found the mistake initially and are willing to help anyone with questions about the filing process.