Here is a link to a DFAS answer. If a military member receives disability pay from the military service as determined by the military branch in DOD upon retirement, then the pay is non-taxable and will not be included on a form 1099R. After retirement, the retiree receives a letter from the service that explains the type of pay (disability retirement ((non taxable)) or retirement ((taxable)).
Any taxable retirement pay based on length of service is taxable and reported on a 1099R.
Separately if the VA determines a disability rating and the military member receives VA disability pay, that pay is non-taxable and not reported on a 1099R.
The concurrent receipt of military retirement (taxable) and VA disability (non-taxable) is common.
Stopping withholding from retirement pay does not make the pay non-taxable; it is only stopping withholding throughout the year.
Bottom line if the retiree is getting a form 1099R that is reportable on a tax return.
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