How do I recoup taxes taken on severance pay I received after being discharged from the Army?

Feb 05, 2019

I was recently discharged from the Army and received severance pay that was taxed. The severance pay was not supposed to be taxed. How do I recoup those taxes when filing?

I would recommend reading PICPA’s blog on the Combat-Injured Veterans Tax Fairness Act of 2016, particularly the paragraph (and items following) that begins with “If you did not receive a joint letter…” If the severance pay was reported as taxable in a prior year, then an amended return should be filed per the instructions summarized in the blog. If it is for the 2018 calendar year or a nonfiled return, then I would recommend submitting a return without showing the severance as taxable. File the return to the address that can be found in the IRS FAQs (third question from the bottom).

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: William L. Stunkel, CPA, is director of small-business services with Holsinger PC in Wexford, Pa.

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