Military and Government Disability Pensions

[UnusuallyNat]

The income is not taxable. The response I got back from Defense Finance and Accounting Service (DFAS) is that they do not handle amendments and to take it up with the IRS.

The advice you gave does not help the situation as I have received a 1099-R as previously mentioned, and the Turbo Tax Intuit is telling me to fill out the 1099-R as received I have received it in the box. But upon further review, they are saying that I should fill it out as it "should have been" and then the Form 4852 is where I explain the "Determination" [what is wrong with the 1099-R (or missing form)] AND "Efforts" [what were my efforts to get the 1099-R corrected (or receive the missing form)]. Then if I am filing by mail, I would print the Form 4852 and send it and if I am e-filing, it will be electronically be taken care of by Turbo Tax. 

I just printed up the Form 4852 for my record anyway. I guess I will open a new thread on the TSP distribution bit.

Thanks so much for your prompt help. It did help facilitate me in getting to the above steps I have described since the 1099-miscellanious was taking me to "self-employment" income in which this situation is not it.

[Rob_D]

I work at a County Veteran's Services Office (VSO) and my job is to file compensation and pension claims for veterans every day.  I will try to break this down for you.

If you still have questions after reading this, you can contact your local VSO or you can call the VA Regional Office Customer Care Line [phone number removed] for additional assistance.  I am obviously biased, so I recommend you speak to the VSO first.

Here Goes

If you are retired from the military and drawing retired pay, and service connected at 50% or greater, you will be evaluated for CRDP which allows for concurrent receipt of disability compensation and retirement pay without offset.  That is to say, you will draw your full retirement and the full VA compensation.  At 40% and below there is an offset.

For easy math in this example: Retirement Pay = 1000 and VA compensation = 300 for a 20% rating (currently 281.27 but for easy math 300) 

in this case, your total entitlement remains 1000, however your taxable retired pay would be offset by the VA compensation so DFAS would pay you 700 (taxable) and VA would pay the 300 compensation (non-taxable).  There is also a program similar to the retiree's CRDP called CRSC which allows veterans with a rating 40% or lower to receive a partial or complete concurrent retirement and compensation payment based on service connected disabilities that were receive in relation to combat / war.  In that case, the specific combat related conditions ratings would be considered under CRSC and that entitlement would be paid as a concurrent benefit.  

As in the example before, retirement = 1000 VA comp 300 however there is a 10% (pays 142.29 currently 145 for easy math) service connection for a combat related condition, so in this example, DFAS will pay 845 (145 eligible for concurrent pay) and VA still pays 300.

The bottom line is your VA compensation is not counted or reportable as income.

I hope that helps.

[MommaGilmore]

I retired from LA County (Sheriff's) on a disability retirement 09-08-76. SVC.CON.DISB shows on box (unlabled) but would be box 19.  Why can't I find it in your program?

[MarilynG1]

@MommaGilmore  What form did you receive to report your disability income?  Are you under retirement age?

Since we can't see your return in this forum, here's some general info on Police Disability Income. 

If you received a 1099-R, be sure to indicate is it for a 'law enforcement' pension when entering in TurboTax.

Click this link for more info on How to Enter 1099-R. 

[jsrcmr87]

So, if I understand this correctly I received my Service connected disability retroactive to April 02, 2020 from a determination letter dated 02/24/2021. They gave me a breakdown of the benefits amount starting May 1, 2020 at $486.69, a cola adjustment (December 1, 2020, and Retired pay adjustment of Mar 1, 2021. For tax purposes I will ignore January-Mar 2021 as they are not for my 2020 Tax Year. In TurboTax, do I take my 1099-R and subtract the benefit amount for each month in 2020 that applies and that becomes my new Taxable amount? If so, outside of my decision letter, what take forms must I submit with my 2020 Taxes?

John R

[MarilynG1]

@jsrcmr87 No, don't make any changes when entering your 1099-R in TurboTax (the IRS has a copy). 

If you have calculated an amount related to retroactive disability pay that you believe was included in your 1099-R distribution amount, enter an adjustment as a negative number in the 'Other Income' section.  

See the post from @ThomasM125 above.

"Thus, the income will go in as pension income and then be cancelled out by an equal negative adjustment on your form 1040...

Attach a statement to your tax return explaining why the income is not taxable." (your decision letter should suffice). 

Save documentation on how you calculated the amount of your adjustment.

Thanks for your service!

[figueroacruzj23]

Why Turbo Tax don't have as a choice the 1099-R for US Armed Forces.  It has 1099-R for 401K, civil services, etc. but not for what I mention before.

[DanaB27]

The form you get for military retirement is Form 1099-R therefore please select "Form 1099-R". The retirement from US Armed Forces isn't reported on a special form.

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Continue until you get to the "Was this distribution from a Qualified Plan" screen and select "Non-qualified Plan"

@figueroacruzj23