Veterans Owed Refunds for Disability Severance Payments as Income

The IRS is advising certain veterans who received disability severance payments after January 17, 1991, and included that payment as income, should file Form 1040X to claim a credit or refund of the overpayment attributable to the disability severance payment. Most veterans who received a one-time lump-sum disability severance payment when they separated from their military service will receive a letter from the Department of Defense explaining how to claim tax refunds and including a simplified method for making the claim.