By Johnny Jackson
Military veterans could greatly benefit from a new tax-free benefit this tax season, officials say.
"There is a new item that veterans need to be aware of called tax-free veterans' benefits," said Mark Green, spokesman for the Internal Revenue Service.
Disabled veterans who have paid taxes on Veterans Affairs Compensated Work Therapy payments can now pursue a refund for taxes paid on those payments, according to Green.
"Compensated Work Therapy payments received by some veterans, unable to work, are now tax-free," he said. "For those individuals, they will no longer receive a 1099 Form [to report the payments] to the Department of Veterans Affairs."
More than 19,000 veterans, who received Compensation Work Therapy payments in fiscal year 2007, stand to benefit from the tax exemption.
Green says disabled veterans who paid tax on payments in 2004, 2005, and 2006 can claim refunds by filing an amended return using Form 1040X.
The IRS agreed with a U.S. Tax Court decision issued earlier this year which held Compensation Work Therapy payments are tax-free veterans' benefits, and reversed a 1965 ruling that the payments were taxable.
Pete Wheeler, the state commissioner of Veterans Affairs, said that veterans and their dependents should be reminded that benefits paid under any law administered by the U.S. Department of Veterans Affairs are tax exempt.
"This is especially helpful for those veterans and their dependents living on fixed incomes," Wheeler said.
Veterans, or families of veterans, who are currently receiving disability compensation and pension payments can claim exemptions on those payments.
Locust Grove resident, James W. Godwin, Sr., receives disability compensation from Veterans Affairs and hopes to benefit from the tax exemptions.
The commander of the American Legion Post in High Falls, Ga., Godwin served in the infantry of the U.S Marines during the Vietnam War. He is 100 percent service-connected from his career in the military and receives veteran benefits that help him through his retirement.
"It's got a lot of advantages to it," Godwin says. "We wouldn't be able to make it without Veterans Affairs."
Other veterans, like Godwin's son who served in Desert Storm, stand to benefit from other tax exempt veterans benefits. Those benefits include: education, training, and subsistence allowances; grants for homes designed for wheelchair living; grants for motor vehicles for veterans who lost their sight or the use of their limbs; GI insurance dividends paid to either veterans or their beneficiaries; and interest on dividends left on deposit with the Veterans Affairs.
However, interest accumulated on money from Veterans Affairs benefits and deposited into any type of interest-bearing account may be taxable, according to Commissioner Wheeler.
Veterans with questions relating to the tax issues, or any other tax matter are encouraged to consult with a tax advisor, Wheeler added.
Taxpayers can also get tax assistance by contacting the IRS on weekdays at 1-800-829-1040, between 7:30 a.m.. and 5:30 p.m. More information about taxable and tax exempt veterans benefits is available at the IRS web site.
On the net:
Internal Revenue Service: www.irs.gov