Concurrent Receipt Confusion -Making a DFAS Election?

[rootbeer22]

Folks:

Over the last couple of days I've been trying to learn about the tax implications of my VA Disability retro payment and new disability pay that I received last July? Currently, I'm at  a 90% Disability Rating and it when I got the VA letter, I saw that I was already put in for concurrent receipt due to the fact that I receive a military pension already. Anyway, I guess I'm supposed to make some kind of "election"  with DFAS and I totally missed that? I guess that I have 1 year from the time that I got my first award letter so I am still good. Right now, I've been working on putting my tax package together for accountant and read that  "Concurrent Receipt" is not totally tax-free? The good news is that I have a great tax accountant who will figure things out and spent almost none of the retro..so if I take a big tax hit...the money is there to cover it.

Anyway, If someone could explain the basic "DFAS Election Steps" for someone with a regular active duty 22 year pension and advise what's the smartest DFAS election to make with the best advantages with compensation and taxes. Also, I may be at 100% when my NOD is adjudicated but that going to be a while?

Godspeed  Rootbeer22 

 

[Berta]

If they gave you the CRDP, that means as far as I know ,that you don't have to make any election because I assume the election situation only occurs when a vet is eligible for both CRSC and CRDP and must elect only one benefit of these benefits.

There is plenty info here under a search for CRSC and CRDP and also Military.com has info and discussion area for these benefits.

 

http://www.military.com/benefits/military-pay

[rootbeer22]

Beta:

 

Thanks...I have memory issues which is very frustrating for me in my daily life..and I've been trying to decipher the rules and regulations. I have been searching the hadit.com  forum for this issue but it's till confusing to me. For instance the retroactive lump sum that I received came from the VA and hence is supposed to be tax free? Also, I verified on my bank account that the source was the VA for the lump sum. My wife and I did not spend any of it in case there was a tax issue.  But the DFAS cite says it's taxable? Anyway, I sent everything off to my accountant yesterday for him to figure out. Also, It appears that DFAS already made the Concurrent Receipt versus CSRC decision for me already. I appreciate the fact that you and others don't want to have to repeat yourselves and cover old ground  when the information is already on the site somewhere else already.

 

Anyway thanks Rootbeer22

[TALON II FE]

From the IRS website:

Information for Veterans with Disabilities

The Internal Revenue Service is committed to providing assistance to veterans and veterans with disabilities. We work with community and government partners to provide timely federal tax-related information to veterans about tax credits and benefits, free tax preparation, and asset-building opportunities available to them.

VA Disability Benefits  
Do not include disability benefits you receive from the U.S. Department of Veterans Affairs (VA) in your gross income. In particular some of the payments which are considered disability benefits include:

• Disability compensation and pension payments for disabilities paid either to veterans or their families,
• Grants for homes designed for wheelchair living,
• Grants for motor vehicles for veterans who lost their sight or the use of their limbs, or
• Benefits under a dependent-care assistance program.

VA has created an eBenefits portal where you can apply for many of these benefits online. Veterans can apply for Veterans' Benefits Online (VONAPP), access VA Payment History, apply for VA Home Loan Certificate of Eligibility, check on Compensation & Pension Status, and more. Family members (spouses and dependents [ages 18+]) of Service members and Veterans may register for a Basic (Level 1) DS Logon to access eBenefits. View TRICARE benefits, explore eLearning opportunities, and request information from State VA offices online.

The VA publishes an annual benefits booklet, a comprehensive guide for Federal Benefits for Veterans, Dependents and Survivors.

If you are a military retiree and receive your disability benefits from the VA, see IRS Publication 525 for more information .

Special Tax Considerations
Special tax considerations for disabled veterans occasionally result in a need for amended returns

Rehabilitative Program Payments
VA payments to hospital patients and resident veterans for their services under the VA's therapeutic or rehabilitative programs are no longer included in income. For more information, please see IRS Revenue Ruling 2007-198.

 

Below is an excerpt from IRS PUB 525 that applies to us.  Simplified: What you get from VA, tax free.  What you get from DFAS, taxable.

 

Military retirement pay.   If your retirement pay is based on age or length of service, it is taxable and must be included in your income as a pension on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Do not include in your income the amount of any reduction in retirement or retainer pay to provide a survivor annuity for your spouse or children under the Retired Serviceman's Family Protection Plan or the Survivor Benefit Plan.

 

  For a more detailed discussion of survivor annuities, see Pub. 575.

 

Disability.   If you are retired on disability, see Military and Government Disability Pensions under Sickness and Injury Benefits, later.

 

Qualified reservist distribution (QRD).   If you received a QRD of all or part of the balance in your health flexible spending account because you are a reservist and you have been ordered or called to active duty for a period of 180 days or more, the QRD is treated as wages and is reportable on Form W-2.

 

Veterans' benefits.   Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the Department of Veterans Affairs (VA). The following amounts paid to veterans or their families are not taxable.

• Education, training, and subsistence allowances.

• Disability compensation and pension payments for disabilities paid either to veterans or their families.

• Grants for homes designed for wheelchair living.

• Grants for motor vehicles for veterans who lost their sight or the use of their limbs.

• Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death.

• Interest on insurance dividends left on deposit with the VA.

• Benefits under a dependent-care assistance program.

• The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001.

• Payments made under the compensated work therapy program.

• Any bonus payment by a state or political subdivision because of service in a combat zone.

 

   Note. If, in a previous year, you received a bonus payment by a state or political subdivision because of service in a combat zone that you included in your income, you can file a claim for refund of the taxes on that income. Use Form 1040X to file the claim. File a separate form for each tax year involved. In most cases, you must file your claim within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. See the Instructions for Form 1040X for information on filing that form.