Do I have to pay taxes on military retirement if I was awarded VA disability compensation?
I received my first military retirement payment in February 2011 but was then awarded disability compensation from VA in October 2011, retroactive to January 2011. I no longer receive payments from the military. Everything through VA. From what I understand, since it was retroactive to the first of the year, none of the money I received from my military retirement should be taxable...but I still received a 1099-R from DFAS for all the retirement money they sent me from February through October. Do I still have to pay taxes on this money? If not, how do I address this when completing my taxes?