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Combat-Injured Veterans tax refund on disability severance

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If you got a lump-sum disability severance payment from the Department of Defense (DoD) when you separated for a combat-related injury, there's a real chance the government withheld or reported federal income tax on that money that it should never have taxed. The Combat-Injured Veterans Tax Fairness Act (CIVTFA) of 2016 exists specifically to fix that. This guide walks you through exactly who qualifies, how to get your paperwork, and how to file the amended return yourself. I'll also flag the one thing people mix this up with (a VA rating-increase refund), because it's a different process with a different form of proof.

Step 1 - Confirm this is the right refund, not a look-alike

This refund is narrow and specific. It applies ONLY to a one-time, lump-sum disability severance payment paid to you by DoD when you separated from service, where DoD determined your injury was combat-related and federal tax was withheld from or included as income on that specific payment. It is completely separate from, and should never be confused with, a refund tied to a later VA rating increase or retroactive VA determination on military retired pay. That's a different situation (covered in Step 9 below) with its own paperwork and its own deadline math. Don't let anyone tell you these are the same claim.

Step 2 - Check every way you can qualify (all four must be true)

You qualify for this specific CIVTFA refund if ALL of the following are true:

You received a one-time, lump-sum disability severance payment from DoD when you separated from military service (not monthly retired pay, not VA disability compensation, and not Combat-Related Special Compensation (CRSC) or Concurrent Retirement and Disability Pay (CRDP)).

DoD determined the disability was combat-related (per the criteria described in the 1991 federal court settlement known as the St. Clair case: incurred as a direct result of armed conflict, while in extra-hazardous service, in simulated war exercises, or caused by an instrumentality of war).

The payment date fell after January 17, 1991 and before January 1, 2017.

That severance payment was reported as taxable income on your original tax return for the year you received it (meaning tax was withheld or you paid tax on it).

If any one of those four is not true for you (for example, your severance was on or after January 1, 2017, or your disability wasn't determined combat-related), this specific program does not apply to you. Source: IRS Newsroom - Time is running out for some combat-injured veterans to claim tax refunds.

Step 2a - Understand the DoD/IRS notice letters

In July 2018, the IRS mailed notice letters (IRS Letter 6060-A or Letter 6060-D) to over 130,000 veterans DoD had identified as having received a combat-related disability severance payment during the qualifying window. These letters explained the refund and gave the standard amount for that veteran's situation. If you got one of these letters, it is your single best piece of proof and dramatically simplifies filing. If you never got one, or you can't find it now, that does NOT disqualify you. Go to Step 4 for the workaround.

Step 3 - Find your old DoD letter first (if you have one)

Before doing anything else, search your own paper files, an old address's forwarded mail, or any scanned/filed documents for a letter dated around July 2018 referencing "disability severance payment" and a dollar refund amount. This is Step 3, and it only requires searching what you already have on hand, so there's no need to go anywhere else yet. If you find it, keep it, note the date on it (it starts your filing clock, see Step 8), and continue with Step 5. If you don't have it, continue with Step 4.

Step 4 - Get replacement proof if you don't have the DoD letter

If you don't have the original DoD/IRS letter, you can still file, but the IRS needs two things in its place: (1) documentation showing the exact amount and reason for your disability severance payment, and (2) documentation confirming the combat-related determination. Get these two documents, then come back here and continue with Step 5:

For the severance-payment proof: contact the Defense Finance and Accounting Service (DFAS) at 800-321-1080 (Monday to Friday, 8 a.m. to 5 p.m. Eastern) and ask for a letter documenting your disability severance payment, or pull your DD Form 214 (Certificate of Release or Discharge from Active Duty), which also shows separation pay. Get it there, then come back here and continue with Step 5. DFAS retired military info: dfas.mil/RetiredMilitary.

If DFAS can't locate your record, request your military personnel/pay file from the National Archives, National Personnel Records Center (NPRC) at archives.gov/personnel-records-center. Request it there, then come back here and continue with Step 5.

For the combat-related determination proof: get a copy of your VA disability determination letter confirming the injury, or any VA/DoD document stating the injury was incurred as a direct result of armed conflict, extra-hazardous service, simulated war exercises, or an instrumentality of war. Pull your VA decision letter at VA.gov - View your VA letters and documents, then come back here and continue with Step 5.

Step 5 - Decide: standard refund amount, or compute the actual amount

You have two options for how much to claim. Pick whichever is simpler or larger for your case.

Option A, the standard (simplified) refund amount. The IRS lets you skip reconstructing your old tax return and instead claim a flat, standardized amount based on the tax year you received the severance payment: $1,750 for payments received in tax years 1991 through 2005, $2,400 for tax years 2006 through 2010, or $3,200 for tax years 2011 through 2016. This is the easiest path, especially if you no longer have your old return.

Option B, the actual computed amount. If your actual overpaid tax was more than the standard amount for your year, you can instead reconstruct the real numbers: figure out what your taxable income and tax would have been WITHOUT the severance payment included, compare that to what you actually paid, and claim the real difference. This takes more documentation (your original return, W-2/1099 for that year, proof of the severance amount) and is worth doing only if you have reason to think it's meaningfully bigger than the standard amount. A tax professional or VITA/MilTax preparer (Step 7) can help you run this calculation. Source for both options: IRS Newsroom - CIVTFA refunds up to $3,200.

Step 6 - Fill out Form 1040-X for the correct year

Get Form 1040-X, Amended U.S. Individual Income Tax Return from the IRS, then come back here and continue with Step 7 once you have it. Use a separate Form 1040-X for each tax year in which you received a qualifying severance payment (most veterans only have one year to amend).

At the top of the front page, write "Veteran Disability Severance" or "St. Clair Claim" so the IRS routes it correctly.

If claiming the standard amount (Option A): enter the standard dollar amount for your year on line 15, column B, and again on line 22. Leave the other lines on the form blank. You do not need to refile the whole return or attach a corrected Form 1040.

If claiming the actual computed amount (Option B): complete the form normally, showing the corrected income, tax, and refund calculation, with your supporting documents attached.

Sign and date the form. If married filing jointly for that year, both spouses generally need to sign.

Step 7 - Attach your proof and mail it (this claim cannot be e-filed)

Unlike a regular Form 1040-X, a CIVTFA claim must be filed on paper and mailed to a special IRS unit set up just for these claims, not the standard amended-return address. Attach either your original DoD/IRS notice letter (Step 3) or your replacement documentation (Step 4).

Mail the completed Form 1040-X and attachments to: Internal Revenue Service, 333 W. Pershing Street, Stop 6503, P5, Kansas City, MO 64108.

Questions before or after filing: call the IRS's dedicated combat-injured veterans line at 833-558-5245, extension 378 (7 a.m. to 7 p.m. local time).

If you'd rather have a free professional check your figures or file it for you, use a VITA (Volunteer Income Tax Assistance) site or MilTax (the Department of Defense's free tax service for the military community) instead of paying a preparer. Find a site or start MilTax at militaryonesource.mil/miltax or a VSO/VITA location through VA.gov or irs.gov/individuals/free-tax-return-preparation-for-qualifying-taxpayers.

Step 8 - Know your deadline: this law created a special extended window

Normally a Form 1040-X refund claim has to be filed within 3 years of the original filing deadline or 2 years of paying the tax, whichever is later, and for old severance payments from the 1990s or 2000s that window would already be closed. The Combat-Injured Veterans Tax Fairness Act overrides that by giving you whichever deadline is LATEST of the following three:

One year from the date on your DoD/IRS notice letter (or, if you never got one, from when you first obtain the replacement documentation), OR

Three years from the due date of the original return for the year you got the severance payment, OR

Two years from the date the tax for that year was actually paid.

This is the whole reason veterans with severance payments going back to 1991 can still file today. Do not sit on an old letter. If you have one dated in 2018, get your claim in now rather than later. Source: IRS Newsroom - CIVTFA refunds.

Step 9 - Don't confuse this with a VA rating-increase refund

This is a completely different situation from CIVTFA, and it uses different proof:

VA disability compensation itself is never taxed, at any rating, so there's nothing to amend on the compensation payments themselves.

If you are a military retiree and the VA later issued you a retroactive disability rating (a first award or an increase covering back time), any of your military retired pay that was taxed during that retroactive window, up to the amount that should have been offset by VA compensation, may be excludable from income for those years. That also uses Form 1040-X, but the required attachment is your VA determination letter showing the effective date and amount, not a DoD severance letter, and it runs on its own special statute of limitations (generally extended by 1 year from the date of the VA's determination letter, but not reaching back more than 5 years before that letter). See IRS Publication 525, "Special statute of limitations" and IRS - FAQs regarding disabled veterans pension income.

If that's your situation instead of a combat-related lump-sum severance, follow that separate process using your VA decision letter, not this guide's CIVTFA steps.

Step 10 - Track your refund after you mail it

About 3 weeks after mailing, you can check status using the IRS's "Where's My Amended Return?" online tool, or by calling 866-464-2050. You'll need your Social Security number, date of birth, and ZIP code. Processing typically takes 8 to 12 weeks, sometimes up to 16 weeks, so don't be alarmed if it takes a while given this is a paper-only, manually routed claim.

Print-and-take checklist

☐ Confirmed my severance was a one-time lump-sum DoD disability severance payment, combat-related, paid after 1/17/1991 and before 1/1/2017, and taxed on my original return

☐ Searched my files for the July 2018 IRS Letter 6060-A or 6060-D from DoD/IRS

☐ If no letter: called DFAS (800-321-1080) or pulled my DD Form 214 for severance-payment proof

☐ If no letter: pulled my VA determination letter at va.gov for the combat-related proof

☐ Decided standard refund amount ($1,750 / $2,400 / $3,200 by year) or actual computed amount

☐ Filled out Form 1040-X for the correct tax year, wrote "Veteran Disability Severance" or "St. Clair Claim" at the top

☐ Entered the refund amount on line 15 column B and line 22 (standard method) or completed full computation (actual method)

☐ Attached my DoD letter or replacement documentation

☐ Mailed to IRS, 333 W. Pershing Street, Stop 6503, P5, Kansas City, MO 64108 (paper only, no e-file)

☐ Noted my deadline (later of: 1 year from letter date, 3 years from original due date, or 2 years from date tax was paid)

☐ Confirmed this is NOT my situation if it's actually a VA rating-increase / retired-pay case, and switched to that process instead

☐ Set a reminder to check status at irs.gov/filing/wheres-my-amended-return in about 3 weeks

This guide is for education only and is not tax advice. Every situation is different, and tax law changes. For help filing, use a free VA-accredited Veterans Service Officer (VSO) found through VA.gov, or a free VITA (Volunteer Income Tax Assistance) site or MilTax preparer, or a licensed CPA/enrolled agent. Never pay anyone a percentage of your refund or give banking credentials to a firm claiming to be affiliated with the IRS or VA, that's a scam pattern, not how this program works.

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