Strange Va Letter About Severance Pay Recoupment

[MadMav]

I need a little advice from the crowd.

I am service rated at 80%, but received severance pay for degenerative joint disease at 20%. I have been repaying this pay at 20% of my monthy disability pay. Scheduled out to 2041 for repayment. This is to pay back the total of the severance pay minus Federal Tax withholding. But it now seems they are adding that into the mix now and wanting to repay the total??? I was under the impression this could not be done after Sep 30 1996(I was discharged in 2009).

I just received a letter stating....

"We are proposing to extend the withholding for your disability severance pay. Accordingly we propose to begin withholding all of your VA Compensation until your disability severance pay allowance is paid back."

Yet below that statement in the "revised" comenstion payment chart of the letter it still has me receiving my benefits, minus the adjusted 20% withholding(guessing for the cost of living raise we got). Still all the way until 2041.

It appears from the statement that they are going to withhold ALL of my disabilty compensation, but the revised compensation chart does not reflect this in any way.

My question is this.......can they withhold ALL of my disability compensation or is there a percent they can go up to? Like the 20% it is now? If they can and are going to do this(I intend to call them), how can I fight it? We have been receiving this disability for nearly 3 years now and have came to depend on it. Thank you for any help you can provide!

Mav

[Teac]

Yes it is unfortunate but the VA can and will withhold all your disability.

Frankly, I am surprised that they agreed to accept payments until 2041, I have never heard of more than a 5 year repayment plan and 30 years seems really long for a government debt.

The va will however consider waivers of debt if you have a compelling reason. But from what I understand waivors are almost never given for severance pay. Given that you have been paying for three years, you should try to renegotiate payments.

If it were me, I would find a way to just let then keep the compensation until the debt it paid off..... but then I don't have any idea how much you owe and how long it will take to pay.

Whatever you decide, best of luck hope it works out for you

[sharon]

They will only withhold the percentage of the condition that you received the severance pay. You can use the letter that came with your rating decision to amend your taxes for the year that you got the severance pay. It should have stated so in the letter. If it was seperation pay they would withhold it all. There is a waiver to withhold seperation pay at 50% if withholding it all would cause a hardship.

[MadMav]

They will only withhold the percentage of the condition that you received the severance pay. You can use the letter that came with your rating decision to amend your taxes for the year that you got the severance pay. It should have stated so in the letter. If it was seperation pay they would withhold it all. There is a waiver to withhold seperation pay at 50% if withholding it all would cause a hardship.

You say they will only withhold the percentage of the condition that I received the severance pay. That is 20%. I am now rated at 80% by the VA. Are you saying they can withhold the entire 80% to repay my original 20%? I can understand withholding all of the 20%, but not all of my current rating. Thank you!

Maverick

[jvretiredvet]

This isn't about recoupment of the disability severance pay given to you, but rather recoupment of the income taxes that were withheld. If you have already amended your 2009 returns to recoup the taxes paid, you don't need read any further.

OK, you separated from service with disability severance pay in 2009; disability severance pay was a lump sum, with Federal (and state, if applicable) taxes withheld. As I recall, the standard withholding for FIT in this situation is 25%. This disability severance pay was reported on a W2.

When you filed your Federal and state tax returns for 2009, the disability severance pay should have been included in income. When you received the VA determination letter, according to Page 54 of the 2009 IRS Pub 17 http://www.irs.gov/p...r/p17--2009.pdf ,

If you receive a lump-sum disability sever-

ance payment and are later awarded VA disabil-

ity benefits, exclude 100% of the severance

benefit from your income. However, you must

include in your income any lump-sum readjust-

ment or other nondisability severance payment ·

you received on release from active duty, even if

you are later given a retroactive disability rating

by the VA.

you could have then amended your Federal (and state if applicable) tax returns for that year and received additional refunds (plus interest, likely).

Amending tax returns for 2009 is still "open" until April 15, 2013.

If you want to amend your Federal return, the instructions are at Form 1040-X http://www.irs.gov/p...-pdf/i1040x.pdf . IMPORTANT: YOU MUST USE THE TAX TABLES AND INSTRUCTIONS FOR 2009 http://www.irs.gov/p...i1040--2009.pdf AND NOT 2011 !!!! State tax returns are similar, but each state has somewhat different forms so it isn't possible to give suggestions without knowing the state in question.

You will need your need your 2009 tax return(s) to start the amendment. When you are finished, you have to attach a copy of your VA determination letter to each return. You will have to mail the returns in.

Amending returns can be done by the casual taxpayer. If you choose to have a commercial preparer do the returns, the going rate is in the $125-150 area.

I need a little advice from the crowd.

I am service rated at 80%, but received severance pay for degenerative joint disease at 20%. I have been repaying this pay at 20% of my monthy disability pay. Scheduled out to 2041 for repayment. This is to pay back the total of the severance pay minus Federal Tax withholding. But it now seems they are adding that into the mix now and wanting to repay the total??? I was under the impression this could not be done after Sep 30 1996(I was discharged in 2009).

I just received a letter stating....

"We are proposing to extend the withholding for your disability severance pay. Accordingly we propose to begin withholding all of your VA Compensation until your disability severance pay allowance is paid back."

Yet below that statement in the "revised" comenstion payment chart of the letter it still has me receiving my benefits, minus the adjusted 20% withholding(guessing for the cost of living raise we got). Still all the way until 2041.

It appears from the statement that they are going to withhold ALL of my disabilty compensation, but the revised compensation chart does not reflect this in any way.

My question is this.......can they withhold ALL of my disability compensation or is there a percent they can go up to? Like the 20% it is now? If they can and are going to do this(I intend to call them), how can I fight it? We have been receiving this disability for nearly 3 years now and have came to depend on it. Thank you for any help you can provide!

Mav

[MadMav]

This isn't about recoupment of the disability severance pay given to you, but rather recoupment of the income taxes that were withheld. If you have already amended your 2009 returns to recoup the taxes paid, you don't need read any further.

OK, you separated from service with disability severance pay in 2009; disability severance pay was a lump sum, with Federal (and state, if applicable) taxes withheld. As I recall, the standard withholding for FIT in this situation is 25%. This disability severance pay was reported on a W2.

When you filed your Federal and state tax returns for 2009, the disability severance pay should have been included in income. When you received the VA determination letter, according to Page 54 of the 2009 IRS Pub 17 http://www.irs.gov/p...r/p17--2009.pdf ,

If you receive a lump-sum disability sever-

ance payment and are later awarded VA disabil-

ity benefits, exclude 100% of the severance

benefit from your income. However, you must

include in your income any lump-sum readjust-

ment or other nondisability severance payment ·

you received on release from active duty, even if

you are later given a retroactive disability rating

by the VA.

you could have then amended your Federal (and state if applicable) tax returns for that year and received additional refunds (plus interest, likely).

Amending tax returns for 2009 is still "open" until April 15, 2013.

If you want to amend your Federal return, the instructions are at Form 1040-X http://www.irs.gov/p...-pdf/i1040x.pdf . IMPORTANT: YOU MUST USE THE TAX TABLES AND INSTRUCTIONS FOR 2009 http://www.irs.gov/p...i1040--2009.pdf AND NOT 2011 !!!! State tax returns are similar, but each state has somewhat different forms so it isn't possible to give suggestions without knowing the state in question.

You will need your need your 2009 tax return(s) to start the amendment. When you are finished, you have to attach a copy of your VA determination letter to each return. You will have to mail the returns in.

Amending returns can be done by the casual taxpayer. If you choose to have a commercial preparer do the returns, the going rate is in the $125-150 area.

Sorry for the delay in my responses. It seems to take them a while to show up here due to approval from the powers that be.

I did file it is income in 2009 and did recoup the taxes withheld at that time.

I can scan a copy of the letter if that would help???

Thank you,

Maverick

[Gulfvet45]

It is the part of he has to pay back the severance pay he got for this medical at 20%. They can only take back at the % for at disablity he had from the service.

The law also covers the tax he gets back as when he gets his SC from the VA. there is a court case on this of getting the tax back. The lump sum should have still been the same as the per tax no matter what. the tax return has no play into this.

Yes it is unfortunate but the VA can and will withhold all your disability.

Frankly, I am surprised that they agreed to accept payments until 2041, I have never heard of more than a 5 year repayment plan and 30 years seems really long for a government debt.

The va will however consider waivers of debt if you have a compelling reason. But from what I understand waivors are almost never given for severance pay. Given that you have been paying for three years, you should try to renegotiate payments.

If it were me, I would find a way to just let then keep the compensation until the debt it paid off..... but then I don't have any idea how much you owe and how long it will take to pay.

Whatever you decide, best of luck hope it works out for you