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Frequently Asked Questions Regarding Filing Amended Returns for Disabled Veterans

I've been told that my Form 1099-R is wrong and that I should file an amended tax return to get a refund because my pension income is actually not taxable. Is that right?

Under normal circumstances, the Form 1099-R issued to the veteran by the Defense Finance and Accounting Services correctly reflects the taxable portion of compensation received.

I received an email that states I’m due a refund from IRS, because I get disability compensation from the Department of Veterans Affairs. Do I need to file an amended tax return?

The Defense Finance and Accounting Services generally would not send an email to veterans advising them to file an amended return.

The Department of Veterans Affairs just sent me a determination letter that increased my disability percentage from 30% to 50%, retroactive to 2010. What should I do?

Because the redetermination is retroactive, your previously taxable pension income can now be reduced by the adjustment. You may file amended returns, Forms 1040X, for tax years 2010 and 2011. 

Special statute of limitations. In most cases, under the statute of limitations a claim for credit or refund must be filed within 3 years from the time a return was filed. However, if you receive a retroactive service connected disability rating determination, the statute of limitations is extended by a 1 year period beginning on the date of the determination. This 1 year extended period applies to claims for credit or refund filed after June 17, 2008, and does not apply to any tax year that began more than 5 years before the date of the determination.

Example. You retired in 2006 and receive a pension based on your years of service. On August 1, 2012, you receive a determination of service connected disability retroactive to 2006. Generally, you could claim a refund for the taxes paid on your pension for 2009, 2010, and 2011. However, under the special limitation period, you can also file a claim for 2008 as long as you file the claim by August 1, 2013. You cannot file a claim for 2006 and 2007 because those tax years began more than 5 years before the determination.

Veterans who have questions on filing claims for refund and filing of amended returns are encouraged to seek assistance from a competent tax professional.

Page Last Reviewed or Updated: 10-Dec-2013