Taxpayer deceased in 2010 and his daughter who was administrator of his estate my customer. In 2005 he applied for 100% VA disability and they did not grant this til 2012. My customer wants to know if we can file amended returns to get the tax free benefit from this income now being tax free which was originally claimed as military retirement and taxable?? I know we can amend 2009. No return was filed in 2010 as he died early in the year with no taxable income. Question is there any way to file amendments for the past years that are past the 3 year limitation due to the fact it was impossible to file on time since the ruling just came?
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Sounds doable to me for 2009 and 2010 before 4/15/2013 of course.Originally posted by Bonnie View Post
But check also to make sure VA didn't lavish a whole bunch of money to his estate. The law changed several years ago and veterans now get the disability pay in addition to regular pay. I don't know it to be the case with this deceased vet, but if it is, you can't amend regular retired pay for the adjustment if added funds were disbursed.ChEAr$,
Harlan Lunsford, EA n LA -
No not added funds, he died never knowing he had gotten the full 100% disability. And I know there is no problem for 09 and 2010, but questions is there any way to do 05-06-07-08?Comment
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Usual time frame likely applies
Are you saying they reclassified his "military retirement" to "disability" for all those years (why would it take that long??) or, as mentioned by chEAr$, was there possibly a separate lump sum paid to the estate recently?Originally posted by Bonnie View Post
As for your original question, I don't see any way you could amend returns further back than the "usual" three years. OTOH, if this is a common occurrence, there may be some weird exceptions out there...
FEComment
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This might be a good starting point.
Also, take a look at this excerpt frm Publication 525:
--->> Pension based on years of service. If you receive a disability pension based on years of service, in most cases you must include it in your income. However, if the pension qualifies for the exclusion for a service-connected disability (discussed earlier), do not include in income the part of your pension that you would have received if the pension had been based on a percentage of disability. You must include the rest of your pension in your income.
Retroactive VA determination. If you retire from the armed services based on years of service and are later given a retroactive service-connected disability rating by the VA, your retirement pay for the retroactive period is excluded from income up to the amount of VA disability benefits you would have been entitled to receive. You can claim a refund of any tax paid on the excludable amount (subject to the statute of limitations) by filing an amended return on Form 1040X for each previous year during the retroactive period. You must include with each Form 1040X a copy of the official VA Determination letter granting the retroactive benefit. The letter must show the amount withheld and the effective date of the benefit.
If you receive a lump-sum disability severance payment and are later awarded VA disability benefits, exclude 100% of the severance benefit from your income. However, you must include in your income any lump-sum readjustment or other nondisability severance payment you received on release from active duty, even if you are later given a retroactive disability rating by the VA.
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. <---Last edited by JohnH; 01-12-2013, 03:29 AM."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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Thank you so very much. I was thinking there had to be an exception for such a case. And I have no idea why the VA took so long to grant the disabilityComment
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