VA Retroactive Pay

[eugene1459]

I am ready to file my 2025 taxes and know that my DFAS 1099-R income does not include the VA retroactive  reduction of income due to an increased disability percentage. I know the amount withheld, but don't know how to report the reduction in my 1099-R income without filing and doing a 1040X after my return is submitted. I want to reduce my income by the VA amount, but can't figure out the right way to do it on the return I'm getting ready to finish and file?

[MaryK4]

To report your VA retroactive reduction without waiting to file an amendment, you should use the adjustment method within the 1099-R entry screens. This allows you to report the 1099-R exactly as issued while simultaneously excluding the non-taxable VA portion.

The Step-by-Step Fix in TurboTax

1. Enter the 1099-R exactly as it appears in Federal > Wages & Income > Retirement Plans and Social Security.
2. Click through the follow-up questions until you see a screen titled "Was this a payout from a qualified plan?" or "What did you do with the money?"
3. Look for "Was any part of this distribution non-taxable because it was a retroactive VA disability award?", select Yes and enter the specific amount of the reduction.

Since you are reporting an amount that differs from what the IRS received from DFAS,  keep a copy of your VA Award Letter showing the retroactive effective date and the Audit/Adjustment sheet from DFAS showing the "Combat-Related Special Compensation" or "VA Waiver" calculation.
 

[eugene1459]

I followed your instructions: There was no question under "Qualified" plan "Was any part of this distribution non-taxable because it was a retroactive VA disability award?". Dead end, so far? Help?