Does the DOD Need to Tell Combat-Injured Vets That Too Much Tax Was Withheld From Their Severance Pay? (H.R. 5015)

What is H.R. 5015?

(Updated January 21, 2020)

This bill was enacted on December 16, 2016

This bill would direct the Dept. of Defense (DOD) to identify severance payments made to combat-injured veterans since January 17, 1991 where taxes were withheld and notify veterans who had taxes improperly withheld so they can recover those funds. Combat-injured veterans would have up to one year after they’re notified about the improper withholding and given instructions for recovering the money to file paperwork with the Internal Revenue Service (IRS) for a credit or refund.

DOD would be required to ensure that money isn’t withheld for tax purposes from DOD severance payments to individuals when those payments aren’t considered gross income.

Under federal law, veterans who suffer combat-related injuries and are separated from the military aren’t supposed to be taxed on the one-time lump sum disability payment they get from DOD as severance pay. Due to an accounting error, over 14,000 veterans were improperly taxed to the tune of $78 million.

Argument in favor

The federal government’s tax withholding error led to these combat-injured veterans receiving less severance pay than they should have, and the DOD needs to help them get that money back.

Argument opposed

What’s done is done, the federal government shouldn’t be granting tax refunds or credits for a mistake it made years ago. All the bureaucrats can do now is hope to do better in the future.

Impact

Combat-injured veterans who had taxes wrongfully withheld from their severance pay; DOD; and the IRS.

Cost of H.R. 5015

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Rep. David Rouzer (R-NC) introduced this bill so that combat-injured veterans who were improperly taxed could be notified of the error and request compensation from the government for the mistake:

“Our soldiers, sailors, airmen and Marines risk their lives every day to protect our freedoms. My bill is a common-sense solution to ensure that every veteran who has had their severance payments were improperly taxed receive every penny that they are rightfully owed. These veterans deserve no less for their service and sacrifice to our nation.”

This legislation has the support of 33 cosponsors in the House, all of whom are Republicans.

Media:

• Sponsoring Rep. David Rouzer (R-NC) Press Release