V S I / S S B Payment And V A Compensation

[pacmanx1]

VSI/SSB Recoupment

If you receive Voluntary Separation Incentive (VSI) or Special Separation Bonus (SSB) and later qualify for retired or retainer pay, you will be required to repay the full gross VSI/SSB paid to date. You will receive a notification letter 90 days before your recoupment begins.

Repayment will be made through monthly deductions from your retired pay at a rate of 40 percent of your monthly pay. Lump sum repayments are not allowed, but you can request that we increase your monthly payment amount by sending us a signed written request.

If the Department of Veterans Affairs (VA) is also recouping payments, we will coordinate with them to avoid over-collection. We deduct your VA award from your gross retired pay, and then withhold 40 percent of that amount for recoupment purposes. Additionally, you may send us any documentation you have showing the amount the VA collected.

Taxability We cannot change previously issued 1099R forms, nor can we recover any funds sent to the Internal Revenue Service to cover the taxes on the payments already made to you.

When we recoup VSI/SSB payments, we treat it like a pre-tax deduction. That is, we reduce your taxable income by the amount we deduct for the recoupment each month.

For Example: If you received a gross separation payment for $60,000 less Federal Income Tax Withholding of $12,000, you would have received a net check for $48,000. We will recoup the gross amount of $60,000.

If you become eligible for $2,500 per month from retired pay, less a VA waiver of $200 you would have an adjusted gross taxable income of $2,300. We recoup at the rate of 40% of gross income, which would be $920.

Your adjusted gross taxable income will be reduced by the amount being recouped ($2,300 less $920) leaving a new taxable income amount of $1380.

Waivers This is not a debt, but rather a recoupment. We are required by law to recoup these separation payments; therefore, we cannot consider waivers.

Hardship

You can request a more lenient repayment plan if you are experiencing financial hardship. We will consider your application for hardship if the recoupment prevents you from meeting the costs necessary for essential subsistence. These essentials include food, housing, public utilities, clothing, transportation, and medical care.

Your notification letter will include a Financial Statement of Debtor and a set of instructions. Please follow the instructions and return the Financial Statement of Debtor within 30 days of receipt of the letter to the address below. You can also submit the statement any time your financial status changes and results in a hardship:

DFAS
U.S. Military Retired Pay
P.O. Box 7130
London, KY 40742-7130

If financial hardship is found, the recoupment rate will be reduced based on your financial condition and you will be required to submit a new application annually. The minimum recoupment rate is 10 percent.

http://www.dfas.mil/retiredmilitary/plan/separation-payments/vsi-ssb-recoupment.html

Edited September 20, 2013 by pacmanx1

[Carl the Engineer]

pete992,

This is what happened to me except:

I recieved readjustment pay when I seperated of about $60000.00, and they took around $17000.00 out in taxes. The whole $60000.00 is supposed to be taken out of my age 60 non-traditional Guard retirement when I turn 60 in 7+ years.

However, I did recieve VA compensation after I got out and they held back my VA comp to satisfy my readjustment pay. Only, the took back the less taxes amount of $43000.00 which is stated in the reg.

They tell me that I have satified my debt to dfas, so hopefully I will get my full retirement on time now.

I did get in a argument with the State of WI tax department, as they did tax my readjustment pay $4000.00 and my contention was that since I have to pay it back before I could get my retirement, that this was retirement money and non taxible (WI doesnt tax military retirements). They said it wasnt retirement money because I wasnt recieving a retirement. Anyway, I fought that for about a year and then made payments. I still think I am right on that one, but now that they recouped it via disability payments, that would really confuss them. So I let that one die...

Hamslice

[Philip Rogers]

I believe that since it's been recouped you are entitle to a return of the taxes paid on it, however I'm not positive. You should check.

pr

[Guest]

Yes, this is how a lot of veterans get screwed. It happened to me also, when I contacted the IRS, I had to fill out a lot of forms and waited about a year later to get a nice letter in the mail stating that the statute of limitations had already ran out and I could not get a refund on my taxes. For the IRS the statute of limitations is six years and I was six years and one month. It was really sad because at the time I was living on really hard times and needed the money and got caught up in government red tape.

[Walt313]

Just got my 70% rating and in the letter I will receive my first check in NOV 2016. I've gotten sa lot of back chatter about waivers and legislation to correct this. Anyone have any good news to tell me?