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      How to get your questions answered. A few observations, and requests of all members. All folks who come here are volunteers who do this on their own time and their own dime.To avoid burning out our best contributors please follow these guidelinesf you are reading a post and it reminds you of a question you want to ask, start a new topic, if you place your question in someone thread it will be difficult to distinguish your question from the original poster, you will get better results posting a new topic with your question. 1. Before Posting please do a search and see if your question has already been answered. If you find the answer print it out and put it in a file to use as a reference file, I find this helpful myself. 2. If you can not find the answer and you do post a question, please print out those answers and refer to them to avoid duplicate questions. 3. Refer to the Frequently Asked Questions4. Duplicate questions will come up from time to time but the keeping them to the minimum will lighten the load on the regular volunteers.5. Respect folks privacy do not request their personal phone numbers for claims help, it is inappropriate and not why they are here.6. Keep the topics focused on veterans issues, in closing Search first Search ... Ask second.it may save a lot of time or at the very least enlighten you.
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    • A bit about Tbird and HadIt.com for those who've asked...

      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. I would not file the PTSD claim, nor even discuss it. By Feb 1991 I had moved to the San Francisco bay area and was staying at a friends apartment and pretty much I was just a puddle. In desperation one night I called suicide hot line, I had no job, no idea about going to the VA. They talked with me for a long time and explained to me that I could go to the local VA hospital even if I did not have insurance. Now, I know what you are thinking if I was 50% why didn't I just go to the VA in the first place, two reasons 1, this was Feb 1991 and the 50% didn't come till May and 2, even if it had come through it is unlikely that I would have had the mental acuity at the time to put the two together. I relate this here because it is where so many of our brothers and sisters are coming from, perhaps where you started. Fuzzy and unsure, in pain and sometimes homeless they come to the VA hospital for help. And that is where I ended up. Up to the pysch ward I went, blah, blah, blah, a few days later I was released with a promise of a call from the out patient program, which I would soon be entering. Blah, blah, blah, after many missed communications, and no call backs I was at the Day Hospital everyday M-F. And this brothers and sisters is where I began to learn and formulate my plan for HadIt.com. Veterans, veterans everywhere…I spent a year in the day hospital and about another year at a sheltered workshop before I got back on my feet. So I just talked to veterans everyday waiting for appointments, waiting for prescriptions, waiting for a vet rep and I started to learn the system. While in the navy I was data analyst and had to learn a 5 volume manual and just about anything you were suppose to do was in that manual. So I figured there must be a manual on how to do a VA claim or at the very least regulations. So I found out about the Code of Federal Regulations, United States Code, Veterans Affairs Manuals and so on and so forth. Of course this was 1991/1992 I was living in a tiny studio apartment in a particularly bad neighborhood, working in a sheltered workshop making a nickel per envelope I stuffed throw in PTSD and you will see that it was a difficult task for me to get somewhere where they had copies of these, let alone that they would let me look at. And there was so much knowledge around me, it was like the gold rush in those days, I could just sit on a bench a veteran would sit down next to me a little conversation later I had another nugget, I made copious notes. Phone numbers to call, ask for this guy or that guy he'll give you the straight scoop and they'd slip me a piece of paper with a number on it. You want to read this regulation or that one and another slip of paper into my hand. I spent a lot of time on those benches watching the squirrels they gathered their nuts and I gathered mine :) So I'm thinking I could put a little handbook together print it out and hand it out at the VA. Or perhaps fliers. Still formulating, time goes by, 1994/1995 I am being treated for PTSD regularly and doing and feeling much better and I go to work for a company as a marketing systems analyst and I discover the internet. Well let me tell you that was perhaps one of the most significant life changing events I have ever experienced. And I might add finally a positive one :) It seemed only natural to me that surely there must be a website that contained all the knowledge I wanted, well as it turned out not so much, lots of stuff but I wanted to get straight to the claims information and there was a lot of stuff to wade through to get to it. 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.
    • HadIt.com Pass It On Cards

      Hi I've updated our HadIt.com Pass It On Cards. They are in a PDF format you can print them out cut them there are 12 to a page. If you have found HadIt.com helpful and would like to pass it on to other veterans this is an easy way to do it.I hope you find them helpful, feel free to leave a few anywhere veterans gather, veterans centers, veterans hospitals, public libraries, be creative. Please make sure though, that if you want to leave some at any business you ask permission first.Here you go http://www.hadit.com...it_on_cards.pdf
    • VA Training and Fast Letter Forum Index

      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... FL = Fast Letter TL = Training Letter First two numbers = last two digits of year of origin Training Letter http://www.hadit.com/forums/index.php?/topic/40694-va-tl-00-07/ http://www.hadit.com/forums/index.php?/topic/40693-va-tl-00-06/ Fast Letter Number Title http://www.hadit.com/forums/index.php?/topic/44262-va-fl-11-15/ http://www.hadit.com/forums/index.php?/topic/44260-va-fl-11-13/ http://www.hadit.com/forums/index.php?/topic/44261-va-fl-11-11/ http://www.hadit.com/forums/index.php?/topic/44310-va-fl-11-09/ http://www.hadit.com/forums/index.php?/topic/42151-va-fl-11-03/ http://www.hadit.com/forums/index.php?/topic/40957-va-fl-10-49/ http://www.hadit.com/forums/index.php?/topic/40958-va-fl-10-46/ http://www.hadit.com/forums/index.php?/topic/40959-va-fl-10-45/ http://www.hadit.com/forums/index.php?/topic/40960-va-fl-10-42/ http://www.hadit.com/forums/index.php?/topic/40961-va-fl-10-39/ http://www.hadit.com/forums/index.php?/topic/40962-va-fl-10-35/ 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Severance Pay & Taxes


15 posts in this topic

Posted

My question is about severance pay and taxes paid on that severance pay. Recently, literally today, it has come to my attention that if the VA rates a Vet disability we can reclaim that tax money paid with our severance pay. Basically, in a nutshell, will all the money paid in taxes, for me 2009, be refunded or is there some kind of gauge to measure how much to expect in return? Say if you paid $6000 you get roughly 10% of that back or is all $6K refunded to you? I just don't want any thing to come back and bite me. You know?

I called the IRS; I've seen crazy stuff about you need to submit corrected W-2's from DFAS, final orders, submit DD-214, blah, blah, blah & blah. The only thing the IRS said I need to send them is a 1040X, VA determination letter with the award and effective start date of that award letter. As well as the amount of my severance pay that was taxed. I have all this information.

My last concern is the deadline is Apr. 15, 2013 for me. I have an appointment with H&R Block Thursday. I will more than likely submit this 1040X to the IRS on the 26th-same day. My question is, can the government sit on this paperwork until Apr 16, 2013 next year and send me a reply back telling me that my 3 years are up and I am no longer entitled to that recoupment of tax monies paid? I could seriously see the government doing something like that if it is possible. You know how they can be!!!

Does anyone know what's up or have personal experience in this area? I think I am being over paranoid but if you lived my life you would be the same way.

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The following is somewhat out of order to the way you posted, but I think it flows nicely ....

Does anyone know what's up Yes, I do. or have personal experience in this area? Yes, I do.

The only thing the IRS said I need to send them is a 1040X, VA determination letter with the award and effective start date of that award letter. As well as the amount of my severance pay that was taxed. That's correct. Pretty much what IRS Pub 17 Page 53 Column 1 Paragraph 2 http://www.irs.gov/p...s-pdf/p17.pdf says, as well as the instructions for Form 1040-X.

Basically, in a nutshell, will all the money paid in taxes, for me 2009, be refunded or is there some kind of gauge to measure how much to expect in return? Say if you paid $6000 you get roughly 10% of that back or is all $6K refunded to you? After you file the 1040X, the severance pay due to disability/retroactive VA disability compensation has now magically been "recharacterized" from taxable to non-taxable income. However, any other income from 2009 still remains taxable. Also, there are miscellaneous tax credits, whose amount might change one way or another, because of the now reduced income. It's difficult to say what the exact affect is, ie., the additional refund might be.

BTW, this is valid for DISABILITY SEVERANCE PAY ONLY.

Also, be advised that you will be paid interest on the additional refund from April 15, 2009 2010 (oops, my bad, edited 7/22/2012) to the date the 1040X is processed. Early in 2013, you will receive a Form 1099-INT from the Treasury and this interest will be taxable income on this year's return (to be filed by April 15, 2013.

My last concern is the deadline is Apr. 15, 2013 for me. I have an appointment with H&R Block Thursday. Unless Herbie did your 2009 return, bring in your file copy of your 2009 return; if HRB didn't do the return and you don't have a copy, they can order a tax transcript. Be advised that Herbie charges $100-150 for amended returns, paid before you get the return(s).

I will more than likely submit this 1040X to the IRS on the 26th-same day. Amended returns cannot be eFiled, they must be "paper filed", ie., mailed in. Processing is in the 8-12 week range. I'd suggest certified, return receipt requested.

My question is, can the government sit on this paperwork until Apr 16, 2013 next year and send me a reply back telling me that my 3 years are up and I am no longer entitled to that recoupment of tax monies paid? Sure ... also, don't forget the Maya calendar suppositions for December 21, 2012, the possibility of some dam breaking and you being washed away, or any other personal cataclysm.

Put a little tick note in your files. If you mail the 1040X on or about August 26, you should expect your refund check in the late October-late November-ish time frame. If you haven't heard anything by mid-December, you can contact the Taxpayer Advocate Service http://www.irs.gov/advocate/, or go back and ask Herbie to check (they'll just get your tax POA and contact the Advocacy Service anyway).

I could seriously see the government doing something like that if it is possible. I can't. Seriously.

You know how they can be!!! No, I don't know how they can be.

My question is about severance pay and taxes paid on that severance pay. Recently, literally today, it has come to my attention that if the VA rates a Vet disability we can reclaim that tax money paid with our severance pay. Basically, in a nutshell, will all the money paid in taxes, for me 2009, be refunded or is there some kind of gauge to measure how much to expect in return? Say if you paid $6000 you get roughly 10% of that back or is all $6K refunded to you? I just don't want any thing to come back and bite me. You know?

I called the IRS; I've seen crazy stuff about you need to submit corrected W-2's from DFAS, final orders, submit DD-214, blah, blah, blah & blah. The only thing the IRS said I need to send them is a 1040X, VA determination letter with the award and effective start date of that award letter. As well as the amount of my severance pay that was taxed. I have all this information.

My last concern is the deadline is Apr. 15, 2013 for me. I have an appointment with H&R Block Thursday. I will more than likely submit this 1040X to the IRS on the 26th-same day. My question is, can the government sit on this paperwork until Apr 16, 2013 next year and send me a reply back telling me that my 3 years are up and I am no longer entitled to that recoupment of tax monies paid? I could seriously see the government doing something like that if it is possible. You know how they can be!!!

Does anyone know what's up or have personal experience in this area? I think I am being over paranoid but if you lived my life you would be the same way.

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Posted

The following is somewhat out of order to the way you posted, but I think it flows nicely ....

Does anyone know what's up Yes, I do. or have personal experience in this area? Yes, I do.

The only thing the IRS said I need to send them is a 1040X, VA determination letter with the award and effective start date of that award letter. As well as the amount of my severance pay that was taxed. That's correct. Pretty much what IRS Pub 17 Page 53 Column 1 Paragraph 2 http://www.irs.gov/p...s-pdf/p17.pdf says, as well as the instructions for Form 1040-X.

Basically, in a nutshell, will all the money paid in taxes, for me 2009, be refunded or is there some kind of gauge to measure how much to expect in return? Say if you paid $6000 you get roughly 10% of that back or is all $6K refunded to you? After you file the 1040X, the severance pay due to disability/retroactive VA disability compensation has now magically been "recharacterized" from taxable to non-taxable income. However, any other income from 2009 still remains taxable. Also, there are miscellaneous tax credits, whose amount might change one way or another, because of the now reduced income. It's difficult to say what the exact affect is, ie., the additional refund might be.

BTW, this is valid for DISABILITY SEVERANCE PAY ONLY.

Also, be advised that you will be paid interest on the additional refund from April 15, 2009 to the date the 1040X is processed. Early in 2013, you will receive a Form 1099-INT from the Treasury and this interest will be taxable income on this year's return (to be filed by April 15, 2013.

My last concern is the deadline is Apr. 15, 2013 for me. I have an appointment with H&R Block Thursday. Unless Herbie did your 2009 return, bring in your file copy of your 2009 return; if HRB didn't do the return and you don't have a copy, they can order a tax transcript. Be advised that Herbie charges $100-150 for amended returns, paid before you get the return(s).

I will more than likely submit this 1040X to the IRS on the 26th-same day. Amended returns cannot be eFiled, they must be "paper filed", ie., mailed in. Processing is in the 8-12 week range. I'd suggest certified, return receipt requested.

My question is, can the government sit on this paperwork until Apr 16, 2013 next year and send me a reply back telling me that my 3 years are up and I am no longer entitled to that recoupment of tax monies paid? Sure ... also, don't forget the Maya calendar suppositions for December 21, 2012, the possibility of some dam breaking and you being washed away, or any other personal cataclysm.

Put a little tick note in your files. If you mail the 1040X on or about August 26, you should expect your refund check in the late October-late November-ish time frame. If you haven't heard anything by mid-December, you can contact the Taxpayer Advocate Service http://www.irs.gov/advocate/, or go back and ask Herbie to check (they'll just get your tax POA and contact the Advocacy Service anyway).

I could seriously see the government doing something like that if it is possible. I can't. Seriously.

You know how they can be!!! No, I don't know how they can be.

Thanks for your reply. It was very helpful. Not worried about the Mayan superstitions. The real Mayans don't even believe that. It was a great read and helped out tremendously. Thank you very much! Yes H&R Block did do my 2009 Tax Return. Shouldn't be a problem.

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Just nosy ... how did your appointment with Herbie go?

Thanks for your reply. It was very helpful. Not worried about the Mayan superstitions. The real Mayans don't even believe that. It was a great read and helped out tremendously. Thank you very much! Yes H&R Block did do my 2009 Tax Return. Shouldn't be a problem.

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Just a reiteration for those who receive a retroactive VA disability determination ... nothing new, but it always bears repeating http://www.irs.gov/I...ns-for-Veterans .

BTW, this link applies to disabled veterans who are retired military or those who separate with disability severance pay.

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i was fortunate in that my severance pay from the navy was tax free because of my service dates. the navy rated me 10 percent. about a month after my discharge, the va also rated me 10 percent. they immediately started witholding my check to recoup the money the navy paid me. this was summer of 1988.

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A statement was made that this only applies to disability severance? Can the tax I paid last year on involuntary separation pay ($25k) be recouped as well since the VA is taking the non-taxed amount back ($75k)? I really feel taken for having to pay taxes on money I don't get to keep.

Thank you so much for your time and any assistance!

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I'm not sure of the difference between involuntary separation pay and disability pay in legal terms but if the VA has you rated for a certain condition that you were involuntary separated for then I do not see why you can't at least try; HOWEVER, it would definitely be an uphill battle to fight. It may hurt just a little though, but the benefits are worth the little pain you go through.

Let's say you were involuntary separated for being overweight, all speculation of course, and you have a record of a bad thyroid while you served on active duty, from a non DoD Provider or DoD provider, BUT NO RECORD prior to active duty. Then, you present that evidence to the VA and they grant you a disability based on a bad thyroid-IF THAT'S EVEN POSSIBLE. Then, I would say there is a possibility. You see how the two can interlink? If they say no, then keep appealing. Eventually you will *probably* win.

You would have to do more research on your own. We all have different things going on in our lives. This is just a great board to help point us in the right direction. It would require a little bit of work on your own time to find out the facts. I am just speculating with the above scenario. I am not sure if the VA rates bad thyroids or not. I think thyroids can be removed if they are bad. I dont know; like I said, it would require more research on your end. That FACTUAL information you gather while researching your case can be used as evidence to help uphold your case too. I KNOW THAT FOR A FACT.

MORAL OF THE STORY: IT DOESN'T HURT TO TRY; JUST CHECK THE FACTS YOURSELF

Also, keep in mind the law limits citizens to 3 years to amend prior returns. For example, myself, I filed my tax return in 2009 for my severance pay. The law allowed me until 4/15/2013 to make an amended return. The three years starts on the due date of that years taxes. So, 2009 I had until approx. 4/15/2010 to file. Then, the 3 years starts to tick down. It DOES NOT go from the date you submit your tax forms. IT STARTS AT THE DUE DATE OF THAT YEARS TAXES. Kind of confusing. I know. Read it a couple of times. It will sink in. I received my federal but still waiting on state. State takes forever. This was ALL purely by luck too. I already had EVERYTHING in my possession. I just submitted it.

Just do your research and you will know for sure. I can tell you now, justrluck has been a tremendous assistance on pointing me in the right direction. Just remember, nobody is going to hold your hand and walk you down the isle. You have to do the research yourself. Not being harsh; just honest.

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Just nosy ... how did your appointment with Herbie go?

It went well. Already received my federal return and currently waiting for State. State is a slow mover. They say to wait 6 months for your return. By the end of this month they should have it processed. I will call at the end of this month to find out for sure, but with the holidays I am expecting delays.

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At this moment I am not inclined to go into the Internal Revenue Code so I will respond with references from IRS consumer guides. But if you want to go to the source: USC 26 http://www.law.corne.../uscode/text/26 . Section 61 discusses what is taxable income (basically, eveything is taxable unless specifically excluded by law). Section 104 covers disability.

A statement was made that this only applies to disability severance? Yep, purt' much so. The 2011 IRS consumer guide Pub 17 Page 53 http://www.irs.gov/pub/irs-pdf/p17.pdf states:

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.

Can the tax I paid last year on involuntary separation pay ($25k) be recouped as well since the VA is taking the non-taxed amount back ($75k)? I really feel taken for having to pay taxes on money I don't get to keep. The technical answer is that you did receive the entire $100k package, of which $25k was Federal income tax withholding (25% is required on all such lump sums). Remember, unless specifically excluded, it is taxable. Depending on your other income(s), filing status, exemptions, deductions, and your true marginal tax rate, you might have already received some part of that $25k back as a refund.

The only recourse I can see is for you to somehow change the actual circumstances of your non-disability discharge with severance pay to a disability discharge with severance pay. This would be a long shot in any case.

A statement was made that this only applies to disability severance? Can the tax I paid last year on involuntary separation pay ($25k) be recouped as well since the VA is taking the non-taxed amount back ($75k)? I really feel taken for having to pay taxes on money I don't get to keep.

Thank you so much for your time and any assistance!

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Basically, you would have to get your initial discharge changed AND you would have to get your rating through the VA in order to have that years tax money you paid refunded back to you. It can be done. You just have to gather the facts and submit it ALL as evidence to uphold your claim. Just remember you have three years for IRS purposes. I guess they figure that's enough time. HOWEVER, even if you don't meet the IRS's deadline, I would still try to get my rating changed. In my opinion it would look better than an involuntary separation which is open for speculation as to what really happened. There's more than one way to skin a cat. In my life it works like this, the more I want the less I get and the less I want the more I get.

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A somewhat related area has to do with local taxes, such as those disabled veterans are exempt from.

Real estate and related taxes have a date to claim the exemptions, after which the veteran cannot obtain the exemption for the tax year in question.

When the VA delays a disability award for years, this can result in a disabled veteran being forced to pay the real estate and other taxes that would not have been due

had the VA acted in a prompt and reasonable time frame.

I seem to remember some convoluted reasoning, based upon recovery of expenses, that the VA, in a proper time frame, might have some obligation to pay expenses incurred due to the delays.

There is also contrary language in the laws concerning the VA and compensation. Anyone ever heard of this, or successfully recovered losses due to the VA's delays?

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You've got almost everything correct except for the statute of limitations for refunds. Prior to June 2008, the SOL was in fact 3 years. The HEART Act (PL 110-245) changed the SOL somewhat for retroactive VA disability determinations, either for retired military or for those who received a military lump-sum disability severance pay. That act allowed me to amend my 2002 return in 2009, but that was an exception for us old farts.

Special statute of limitations. In most

cases, under the statute of limitations a claim for

credit or refund must be filed within 3 years from

the time a return was filed. However, if you

receive a retroactive service-connected disabil-

ity rating determination, the statute of limitations

is extended by a 1-year period beginning on the

date of the determination. This 1-year extended

period applies to claims for credit or refund filed

after June 17, 2008, and does not apply to any

taxable tax year that began more than 5 years before the

date of the determination.

So, depending on dates, we're either looking at a usable Statute of Limitations, or conversely Shit Outta' Luck.

Basically, you would have to get your initial discharge changed AND you would have to get your rating through the VA in order to have that years tax money you paid refunded back to you. It can be done. You just have to gather the facts and submit it ALL as evidence to uphold your claim. Just remember you have three years for IRS purposes. I guess they figure that's enough time. HOWEVER, even if you don't meet the IRS's deadline, I would still try to get my rating changed. In my opinion it would look better than an involuntary separation which is open for speculation as to what really happened. There's more than one way to skin a cat. In my life it works like this, the more I want the less I get and the less I want the more I get.

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When I called the IRS, they told me 3 years. They said there are exceptions but since I fall within the Statue of Limitations that I do not need to worry. I suppose what you mentioned is what they were referring to. Certainly great information to know for those who need it. Thanks. Will tell others as necessary.

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