Combat-Injured Veterans Tax Fairness Act of 2016 The new law “Combat-Injured Veterans Tax Fairness Act of 2016”, went into effect in 2017. Under federal law, Veterans who suffer combat-related injuries and who are separated from the military are not to be taxed on the one-time lump sum disability severance payment they receive from the Department of Defense. More than $78 million is owed to an estimated 14,000 Veterans. This law instructs DoD to identify Veterans who were taxed in order for them to file an amended return to receive their refund.
The IRS is committed to providing assistance to all Veterans.