The Combat-Injured Veterans Tax Fairness Act of 2016 is expected to be singed into law by President Barack Obama before he leaves office. If passed, the act will force the Department of Defense to stop improperly taxing severance payouts for troops that were wounded in war zones. It will also require Pentagon officials to identify any veterans who have been improperly taxed. This could lead to big payout for veterans that may not even know they have been improperly taxed and are owed money.
Officials from the the National Veterans Legal Services Program have been fighting to change the current system for years. Current federal law offers a lump-sum disability severance payment to service members that were the victims of combat-related injuries and are separated from the military. However, the Pentagon has routinely been taking the severance pay of soldiers for years despite warnings from the National Veterans Legals Services Program.
Tom Moore, an attorney at NVLSP, states that over $78 million has been wrongfully taken from veterans over the past decade. Up to 14,000 living veterans may benefit from the policy change. Some of these veterans may soon receive payments worth tens of thousands of dollars.
Current federal law gives veterans that were wrongfully taxed up to three years to recover the money through amended tax returns. However, the responsibility of noticing the error has been left up to veterans. If a veteran was wrongfully taxed and was unaware no action would be taken to correct the error. The new policy change erases the three year window. Allowing all veterans who were wrongfully taxed to claim the full amount of their disability severance pay.
Pentagon officials will have just one year to review all lump-sum disability payments over the last 25 years to determine if any veterans are owed money under the new legislation.