This past year (2019) I receieved Disability Severance Pay in a lump sum that the VA taxed up front. I failed to properly read the documentation that said the VA would return the taxed money to me if I claimed it before the end of the year due to being 90% disabled, and because the VA will recoup the money out of my disability pay. So now I have to figure out how to claim this on taxes so that I can receive the full amount that was paid to the IRS back so that I don't come out of pocket when the VA recoups the money.
I have seen that in 2016 the law was changed so that this money should not be taxed anymore, and since I was rated for disability in 2016, and paid disability severance pay in 2019, I believe the VA made an error in taxing the money. There is also the DFAS instructions at https://www.dfas.mil/dsp_irs.html that only refers to past occurences and how to ammend a return via a 1040x.
All the same, I need to recoup the money from the IRS so that the VA can recoup the money from me.
I attempted following the directions that were posted here from another user that said to put in the full severance pay as a negative number in other reported income, however that only calculated roughly half of the money that was paid to be returned to me. There was no way, that I saw, to claim what was paid, only deducting the full amount from my income.
I called TurboTax support, but unfortunately the lady that assisted me only found the community thread mentioned above and had no other help for me.
