I'm not sure why, but my last post was marked as spam. I would appreciate some assistance with this rather being called spam.
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.
If they treated the severance pay as taxable then you should have gotten a 1099-R which lists the amount of severance pay and the taxes withheld. You would enter the 1099-R as shown below and put in the full severance pay as a negative number in other reported income. If you didn't get a 1099-R you might want to check with the VA or DFAS.