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New law allows injured veterans to recoup erroneous severance taxes

Released 12/19/16 at Stars & Stripes | Tags: Congressional Legislation

Thousands of veterans injured in combat could soon be able to recoup taxes erroneously collected from their disability severance pay due to a new law signed by President Barack Obama. About 13,800 veterans separated from the military due to their injuries might have been affected, the nonprofit group National Veterans Legal Service Program estimates. Due to an accounting error, as much as $78 million in taxes deducted over decades from the lump sum payments. Federal law considers the severance payments tax exempt. But the nonprofit group said the Defense Finance and Accounting Service system was automatically making deductions since 1991, meaning troops injured in conflicts spanning from the Gulf War to the wars in Iraq and Afghanistan might have been taxed thousands of dollars improperly.

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