Military Retirement-Concurrent Receipt

[Bonnie]

Can anyone enlighten me if the amount of a military retirees' retirement pay called Concurrent Receipt is non-taxable. This is not the amount they receive from VA as Disability Benefits which is totally non-taxable and they receive no document for tax purposes for. Up until 2004 their retirement pay was reduced by the amount they received for VA disability. From that time on, if their VA disability is 50% or more they receive the VA disability in addition to the retirement pay (phased in over 10 year period). I have been approached by a customer who says he is entitled to a refund from the IRS for the taxes he paid on the portion of his military retirement which is on a 1099-R he receives that is considered concurrent receipt, now called CRDP. In fact several of his friends have filed amended returns and received refunds. He has showed me an amendment that was prepared taking the amount of his retirement pay 28,000 and multiplying it by 90% which is the percent of his VA disability and saying this is not taxable. I have never been aware of anything like this and do returns for a lot of retirees so if this is the case I need to know. I don't think it's correct as I cannot find anything about this. To my knowledge whatever is on the 1099-R for the military retirement is taxable. Seems to me if any of it was not taxable the government would have already taken that into account when they issue the 1099-R. Any help on this issue would be appreciated.

[JohnH]

This isn't a tax site, but I think it may give you some answers.

http://www.military.com/benefits/military-pay/concurrent-retirement-and-disability-pay-crdp-faqs.html

[gboykin]

I lost 2 clients that trusted someone else more than I. CRDP is taxable. Here are 2 links that state this face: http://www.dfas.mil/retiredmilitary/...ittaxable.html and http://myarmybenefits.us.army.mil/Ho....html?serv=243

Both of my clients got the name of the person that did the amendments from other military retirees. That person is using the Strickland Decision in the amended return explanation box, and it is flying right by IRS radar. This particular preparer is in Virginia. His website says he has defended the decision. One of my clients asked if I could call him for clarification, and he informed the former client that he wouldn't teach me something that he uncovered so I can take work from him. REALLY.......

Anyhoo - I advised both clients that if they went with this guy, they have lost my trust and not to come back.

Hope this helps.

[gboykin]

Here is another article for you:

http://digital.graphcompubs.com/display_article.php?id=927396

[FEDUKE404]

Avoid that path!

Here is another article for you:

http://digital.graphcompubs.com/disp....php?id=927396

I've not yet encountered anything relevant to receipt of CRDP payments, but it would appear that in the majority of cases such income is taxable, as noted by JohnH.

Although the Strickland Decision exists (Google it ! ), it seems to apply only to a very narrowly defined group of individuals.

The Virginia person who is cranking out "Strickland" returns may be on some very thin ice, aside from the fact based on outward appearances he seems (nevermind.....).

I would not lose a lot of sleep over the clients who migrate to his light bulb. In the past I lost some clients to a preparer in the area who "had a different perspective" on some tax rules....yeah, his "fame" spread quickly. It should be noted that the carnival ride came to an end when the IRS, and later the NC Dept of Rev, audited each and every one of his returns for the open years. The fellow also got to serve some active time in prison.

FE

[gboykin]

I've lost no sleep over the lost clients. Once they lose their trust in me, they are gone.

[Bonnie]

I have read all this info (some before I made the original post) and do not see anything that refers to a Strickland Decision. Did I miss something somewhere? Or where do I find information on this Strickland Decision.

[FEDUKE404]

Info

I have read all this info (some before I made the original post) and do not see anything that refers to a Strickland Decision. Did I miss something somewhere? Or where do I find information on this Strickland Decision.

http://www.google.com/#fp=d376bad89d5753b2&q=strickland+decision

FE

[S T]

Unfortunately I cant access FE's post on Kland - but that could be Google as I have experiencing issues all week, nothing against FE for posting it - I do believe it is a Google Issue.

I have used the "Strickland Decision" several times under the IRS Ruling 78-161 for VA Disability payments retro. I also believe there was another post or so on the Strickland Decision on this Forum try this one http://forum.thetaxbook.com/showthre...ght=strickland however, I don't believe this is what you are necessarily looking for.

Seems like John H and Gboykin might have better info or directed you - I have not run across the CRDP
PM me and I will try to PDF to you the Strickland info if you need- I can't seem to attach to this post, but probably can in an email direct to you.

Please keep us posted on your findings

Sandy

[FEDUKE404]

Google problem

Unfortunately I cant access FE's post on Kland - but that could be Google as I have experiencing issues all week, nothing against FE for posting it - I do believe it is a Google Issue.

.....

Sandy

The link shown was merely the "new" link obtained once the specific Google search was performed.

You should be able to see exactly the same results by simply visiting www.google.com and then entering "Strickland Decision" in the search box.

There are numerous links you can follow, both as to the history of the court decision and whether you can or cannot apply that decision to certain military disability payments.

As I stated earlier, I've not encountered this issue but will continue to monitor the discussions on this thread. The Strickland Decision definitely appears NOT to be a "one size fits all" issue.

FE

[ChEAr$]

Treatment of retroactive determination of military retired pay meant that of the retired pay, a certain percentage of it was deemed paid by the VA and therefore non taxable. This is the old system, and determination meant that veteran could deem that percentage paid in prior years to which the percentages applied as non taxable and therefore amend returns.

HOWever.. nowdays veterans are paid disability pay in ADDITION to their regular retired pay. It of course is not taxable and includes retroactive amounts. So it is not necessary to amend any returns. It's all FREE money, both for the back years and current and future years.

Seems that this Strickland decision is now moot.
The IRS revenue ruling 78-161 gives a hint, since isn't the "78" alluding to the year it was issued?

[Bonnie]

That is so funny. Now that I've read it I do know exactly what the Strickland Decision is, just didn't know what it was called. I've done a few amendments over the years where this applied and even funnier I still need to amend our own 2010 return for this very reason. (I know my time is running out, I need to get this done and it is high up on the priority list.) When my customer first contacted me about this matter, this was what I told him was the only reason I was aware of that an amendment could be done. He kept pressing because some of his friends had done amendments and gotten money back so he felt he should be able to also. He came by this week with a copy of a return prepared by a lady in Texas so it's not the same person in Virginia. After looking over the return I felt it was done incorrectly and explained to him why, but also told him I would check further into it just in case there really was something I had missed and was unaware of. I honestly don't think I will loose him as a customer, but time will tell. He told me he would be back next year when he left. He's been my customer for probably 7-8 years and when he moved from Kentucky to Virginia, he sent his stuff to me to prepare returns for him while he was away but now has moved back to Kentucky. I explained to him if he decided to file an amendment he should keep the money in a savings account because he would most likely be required to send it back to the IRS later with interest. He really did seem to understand when he left. Just wanted to make sure I was correct in what I told him

[David1980]

The overall audit percentage is something like 1% right? I would guess there is a lot of stuff that gets claimed and refunds issued where the IRS never catches it. At this point I pretty much ignore "friends had done amendments and gotten money back" as meaningless. Of course, the taxpayers don't see it that way...

[FEDUKE404]

Excellent observation!

The overall audit percentage is something like 1% right? I would guess there is a lot of stuff that gets claimed and refunds issued where the IRS never catches it. At this point I pretty much ignore "friends had done amendments and gotten money back" as meaningless. Of course, the taxpayers don't see it that way...

Of course, there is also the first derivative (frequently seen on these boards) of that effect: "I've always done it that way and never had any problems."

We shall ignore the second TTB derivative of same, which if I recall properly went something like this: "I don't need no steenking cites!!"

And so the search for tax truth continues!

FE

[gboykin]

Seems that this Strickland decision is now moot.
The IRS revenue ruling 78-161 gives a hint, since isn't the "78" alluding to the year it was issued?

This is not true. If someone retires, and then later gets re-rated by VA, it usually has a retro-active date to the date that the claim was submitted. It sometimes takes years for the decision to become final. When they get the decision letter, it states how much was paid, and how much should have been VA. With this letter, the taxpayer is able to file amendments to get back the taxes on the retro pay. The Strickland decision applies here.