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      The following is on my About page, but some have been asking how this all happened. So here is my little story. Tbird US Navy 1983 – 1990 E-6 HadIt.com the website domain registered Jan 20, 1997 the domain is registered and paid for through Jan 21, 2023 at which time I plan to register it for another 15 years Lord willing and the creek don't rise. I guess the best place to start is Jan 1991; I had gotten out of the navy Dec 1990. At my separation seminar, there was a DAV rep Jim Milton he told us to bring our medical records in and he would look through them for us and let us know if we should file a claim with the VA. Well, bless his heart, he opened my medical file, reads the first insert, looks me straight in the eye, and says you will be 50% for the rest of your life and he would file the claim for me. 50% was for surgery I had in the service. True to his word he met with me and talked with me for a long time filled out my paper work and urged me to file for PTSD. 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So taking my lesson from the squirrels earlier I started to gather, gather, gather…and learn HTML and work as a marketing systems analyst and work my claim. 1996/1997 major PTSD cork blows and unemployed. Working my claim, working the website. 20 Jan 1997 register HadIt.com domain name right after getting off the phone with the VA and saying I've had it with this. As fate would have it the old DAV board goes down just as mine opens up and folks start to wander in. So HadIt.com has two main components the website which supports the discussion board with links, articles, research resources etc. The website starts to grow, I can't tell you how many times I had to switch servers for space and features. I continue on a downward trend and in 1998 ended up back home in St Louis living in my sisters basement in therapy and working it, I swear I would have swung a dead chicken around my head at midnight naked if I thought it would have helped. The website continued to do great during this time, I just stayed in the basement bought new software, new books, and learned how to make things work and I continued to use this knowledge to make HadIt.com better. My 100% finally came through from the VA and I had a friend who is an advocate who helped me thru my SSDI claim, he was literally at my side thru the entire process and that came through for me. My therapist and sister continued to try and get me to leave the basement, but to no avail. At some point in 1998 or 1999 I put a counter on the website and was shocked to discover how many visitors we were getting. Time goes by my sister gets married and I move from the basement to the upstairs, there is much celebration that Aunt T is living in the light again. More time goes by and I settle into my life in St Louis and spend more time on the site trying new things, finding more information. 2003 I buy my own home VA loan. For years now I have just considered HadIt.com my job and I get up every morning go to the office and work for several hours, take an afternoon break and see where the rest of day takes me. I have a place in the office to use the computer and a comfortable to place to read journals and articles and take notes. Blah, blah, blah so that is my story and HadIt.com's intertwined.
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      VA Training and Fast Letter Forum Index The following is the index with links to the various Training and Fast Letters plus a few miscellaneous. These letters are not necessarily in the original formatting. I have tried to present them in an easy-to-read form instead of some forms as originally presented. Some of the paragraphs were WAAAAYYY too long. lol - HadIt.com Member fanaticbooks Something to be aware.... Some of these letters may be rescinded, outdated, or otherwise no longer viable. I have still included them because sometimes they provide additional insight or just plain more information than the newest version. Use them wisely. The oldest letters will display at the bottom with the latest letters displayed at the top, all in sequential numbers. Coding of the letters... 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Possible Tax Benefit For Retroactive Pay;researching!

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On other forum found mention of Internal Revenue 78-161, related to Stickland Decision. suggests that retro compensation may be excluded. I will contact DFAS tommorow to see if its true. Found the information when googlin' "computing VA back pay" mentioned in 31 July post. Will update when possible here.If yer like me, less taxes is just dandy. g'nite,cg

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Oops; please edit :) Strickland; not stickland; my bad,cg

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Hello Cowgirl,

Veterans do not pay taxes on retro pay or monthly awards.

Allan

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Rev. Rul. 78-161

1978-1 C.B. 31

Sec. 104

Caution: Distinguished by Rev. Rul. 80-9

IRS Headnote

Armed Forces retirement pay; retroactive disability determination. The Service will follow the Strickland decision as precedent in holding that a taxpayer, who retired from a branch of the Armed Forces in 1976 for years of service and subsequently was awarded a retroactive service connected disability rating by the Veterans' Administration, may exclude from gross income under section 104(a)(4) of the Code that portion of the retirement pay received from the branch of the Armed Forces during the retroactive period that corresponds to the amount attributable to the Veterans' Administration disability rating; Rev. Rul. 62-14 revoked.

Full Text

Rev. Rul. 78-161 [fn1]

Advice has been requested whether, under the circumstances described below, a taxpayer may by reason of a retroactive disability compensation determination by the Veterans' Administration, exclude from gross income under section 104(a)(4) of the Internal Revenue Code of 1954, any portion of the payments made to the taxpayer during the retroactive period by a branch of the Armed Forces as retirement pay based on years of service.

The taxpayer retired from the United States Army on January 1, 1976, for years of service and began receiving retirement pay. On February 15, 1976, the taxpayer applied to the Veterans' Administration for service connected disability benefits and was awarded, on December 1, 1976, a 90 percent disability rating retroactive to February 28, 1976. In order to receive actual payment of the benefits the taxpayer filed, on December 15, 1976, a waiver, pursuant to section 1005 of the Veterans' Benefits Act of 1957, 38 U.S.C. 3105, for reduction of the taxpayer's retirement pay in an amount equal to the disability compensation benefits. Effective from the date of the waiver the taxpayer began receiving disability compensation from the Veterans' Administration and reduced retirement pay from the Army.

Section 61(a) of the Code provides that unless otherwise excluded by law, gross income means all income from whatever source derived, including compensation for services.

Section 104(a)(4) of the Code and the regulations thereunder provide, with certain exceptions not pertinent to this case, that gross income does not include amounts received as a pension, annuity, or similar allowance for personal injuries or sickness resulting from active service in the armed forces of any country.

Section 3010(a) of title 38 U.S.C. provides, in part, that payments due or to become due under any law administered by the Veterans' Administration shall be exempt from taxation.

Rev. Rul. 62-14, 1962-1 C.B. 11, holds, in part that, when a taxpayer is awarded disability compensation by the Veterans' Administration, no portion of the regular Army retirement pay based on years of service previously received is excludable from gross income even though the effective date of the award is made retroactive.

In Strickland v. Commissioner, 540 F.2d 1196 (4th Cir. 1976), the taxpayer retired from the Army for length of service and began receiving retirement pay. Subsequently, the taxpayer applied to the Veterans' Administration for service connected disability benefits and was awarded a 10 percent disability rating. In order to receive actual payment of the benefits the taxpayer filed the required Veterans' Administration form on March 10, 1965, waiving that portion of Army retirement pay equal to the amount of the Veterans' Administration disability benefits. In March 1966 the taxpayer filed a second claim with the Veterans' Administration requesting an increase in disability benefits. On January 17, 1967, the Veterans' Administration notified the taxpayer that the taxpayer was awarded a 100 percent disability rating, as of March 28, 1966, entitling the taxpayer to an additional $208 per month disability benefits. The Veterans' Administration commenced this benefit on February 1, 1967, after the Army notified the Veterans' Administration that it would correspondingly reduce the taxpayer's retirement pay. The court held that the Veterans' Administration's retroactive determination that the taxpayer was eligible for increased disability benefits was controlling. Thus, the taxpayer was entitled to exclude from gross income under section 104(a)(4) of the Code, part of the payments previously received as retirement pay based on rank and length of service.

The Internal Revenue Service will follow the decision of the United States Court of Appeals for the Fourth Circuit in Strickland as precedent in the disposition of similar cases involving section 104(a)(4) of the Code.

Accordingly, in the instant case, the taxpayer may exclude from gross income under section 104(a)(4) of the Code, that portion of the taxpayer's Army retirement pay received between March 1, 1976 and December 15, 1976, that corresponds to the amount attributable to the Veterans' Administration disability rating.

Rev. Rul. 62-14 is revoked.

[fn1] Also released as News Release IR-1979, dated March 31, 1978.

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Posted · Report post

Cowgirl, Here is how DFAS, VA and the IRS explained it to me. Let us know if you are told something different. It is interesting that the VA shaves the pennies off each month amount due - I wonder how much they take by doing that.

From all of them: any payment from the VA is taxfree. On the spreadsheet breaking out your retro award the last colum shows amount due from the VA -- so it is taxfree.

DFAS will not go back and issue updated 1099Rs. DFAS and IRS said for prior year tax returns you need to file amended returns and cite the strikland decision as the reason your retired pay is reduced. The spreadsheet lays it out month by month so it is easy to calculate the reduced amount. It is just like your current VA waiver amount from your RAS. You just subtract the CRDP amount from your VA award and reduce your monthly retirement pay. I received my retro this year, filed my amended returns using this guidance and I have already received my refund from the IRS :)

DFAS won't go back and update the RAS for the current year so the 1099R won't reflect any VA waiver from the retro. The IRS told me to do the same adjustments for months that DFAS didn't subtract the VA waiver on the RAS. They said to put the 1099R amount on the total pension line(a) and on the taxable line (;) to put the adjusted amount.

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Posted · Report post

Hello Cowgirl,

Veterans do not pay taxes on retro pay or monthly awards.

Allan

Obviously you are correct; however, in another post CG was asking about the taxability of CRDP (Concurrent Receipt of of Disability Pay)--retired pay for service plus disability pay when the level is 50% or more-- which is fully taxable. I'm not sure if payment by the VA, which is discontinued upon receipt of CRDP, is being confused with the CRDP itself which is paid by DFAS.

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Here is how CRDP being taxed was explained to me. Before CRDP retirees had to give up $1 of retired pay for every $1 of VA payment (called VA waiver). So if a retiree got $2000 in retiremnet pay and $1000 in VA payment, they would waive $1000 from retired pay to get the taxfree $1000 VA payment. They would end up getting $1000 retired pay and $1000 VA award for a total of $2000 a month, but only have $1000 in retired pay taxed.

Under CRDP, the retiree would not have to waive the dollar for dollar amount to get the VA payment but they would have to pay taxes on all the retirement pay. They would get their entire $2000 retired pay that is all taxable and the $1000 VA payment that is taxfree for a total of $3000 a month.

Since CRDP is phased in over 10 years, retirees wont get to keep their entire retired pay and VA award until 2014. Until then they get a portion of their CRDP and their retire pay is reduced by the remaing VA waiver amount which reduces the taxable amount.

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Here is how CRDP being taxed was explained to me. Before CRDP retirees had to give up $1 of retired pay for every $1 of VA payment (called VA waiver). So if a retiree got $2000 in retiremnet pay and $1000 in VA payment, they would waive $1000 from retired pay to get the taxfree $1000 VA payment. They would end up getting $1000 retired pay and $1000 VA award for a total of $2000 a month, but only have $1000 in retired pay taxed.

Under CRDP, the retiree would not have to waive the dollar for dollar amount to get the VA payment but they would have to pay taxes on all the retirement pay. They would get their entire $2000 retired pay that is all taxable and the $1000 VA payment that is taxfree for a total of $3000 a month.

Since CRDP is phased in over 10 years, retirees wont get to keep their entire retired pay and VA award until 2014. Until then they get a portion of their CRDP and their retire pay is reduced by the remaing VA waiver amount which reduces the taxable amount.

I totally agree; there IS a resiidual of VA disability pay until 2014 as you mention above. CRDP is fully taxable...

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Just got here, soemtimes I forget to mention that I am a retired veteran with disability. It does make a difference. Thanks Manitou for connecting the terms.

From what I understand, On the VA retroactive compensation payment letter, backside, in that the far right column "total amount due from VA" column that amount is "nontaxable". As long as I have legal statements to back up the reasons I am or am not paying taxes, I am okay. Interesting, the many columns on the back of the letter also describe the same amounts "due from the VA" in the far right column exactly the same as "CRDP award". So hopefully if I submit my paperwork correctly, that CRDP award column wont entirely confuse the IRS.

I do recieve retired pay, VA waiver (non-taxable) and CRDP (taxable).Dependent rate not yet recieved, that will be more fun. cg

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Thanks Manitou Sprgs for clearing that up.

Allan

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