Tax Refunds for VA Disability Benefits

It’s tax season. Did you know, while military retirement pay benefits are taxable as regular income, veterans disability compensation is not? See 38 U.S.C. § 5305. Furthermore, if you’re receiving a military pension and receive a back pay award for veterans disability compensation, you may be eligible for an income tax refund.

Statute of Limitations for Tax Refund for Veterans

According to 26 I.R.C. § 6.511(d)(8)(B), the statute of limitations for claiming a regular tax refund is three years from the time the return is filed, or if later, two years from the time the tax was paid. For veterans who have received a back-pay award, the statute of limitations is extended another year from the date of the determination; however, there is a five-year limit on the number of years the veteran can go back.

The following example illustrates the application of this rule:

Bob is a veteran who receives $400 a month in military retirement pay. On July 9, 2012, he was awarded $20,000 in back-pay for his back injury. Bob has three years under the regular statute of limitations plus an additional year for veterans, so he has until July 9, 2016 to file a claim for refund.

Under 26 I.R.C. § 6.511(d)(8)(B), Bob is limited to filing for a refund to five years prior to the determination date of his back-pay award. Five years prior to that date for Bob would be July 9, 2007, which would make 2008 the earliest he could file for a tax refund. So Bob could file a refund claim for 2008 through 2012, and the VA determination would make his military retirement pay retroactively tax free.

Contact Tax Refund Attorneys for Veterans Today

Filing your taxes as a veterans getting VA disability benefits can be confusing and difficult. Berry Law Firm and the team of expert VA benefit attorneys are here to help the process.  If you are having trouble filing for your tax refund and are a disabled veteran please call (888) 883-2483 or contact us online today for a free consultation. We proudly represent veterans in all 50 states.