There is a new benefit available to Veterans who paid taxes on some of their compensated work therapy programs in the past. Due to the passage of recent legislation, veterans who paid tax during the last three years can claim refunds.
Previously payments made to disabled veterans under the department of VA compensated therapy for work program were taxed for those funds. People who receive these funds will not have to receive a form 1099 from the IRS according to the recent ruling. Benefit years 2004, 2005, 2006 are able to now claim a refund by using tax form 1040X. This is thought to be about nineteen thousand veterans that were paid CWT funds and were taxed on it.
This stems from a U. S. Tax Court decision issued previously in 2007. The tax court held that payments such as CWT funds are used to provide help and assistance to veterans and as such should not be taxed. The IRS reversed itself, in going back against a decision from 1965. In the 1965 decision the IRS declared the payments were taxable income and directed the Veterans administration to issue Form 1099 yearly so veterans could pay taxes on this money.
The CWT program supports assistance of various natures to veterans that cannot support themselves or work. The VA finds businesses and private industries to work with veterans, and includes re learning job and work habits, and intensive on the job training. By incorporating businesses the VA gives veterans the benefit of trained people who are already successful teaching and mentoring their rehabilitation progress. This makes for successful partnerships, and increased self-esteem on the part of the Veteran.
Here are some questions and answers about the new changes and benefit.
I currently participate in CWT programs, with the VA? So these are still ones I have to pay tax on? No, due to the recent ruling by the IRS and the Tax court action, the CWT benefits are not taxable any longer. In fact you will be able to receive a refund for any taxes you paid for 2004, 2005 or 2006.
So I can file for a refund for those years for my CWT tax that I paid in. Is this something that I have to do, am I required to amend my prior year tax returns and collect this refund? No, due to the recent change in IRS tax ruling, you owe no federal tax from this point on, and you CAN (not have to, but can) receive a refund for 2004-2006. If you paid taxes on the CWT benefits for those years, you can file for a refund. If you don’t, the Federal Government will just keep your money. They wont sent it to you unless you apply for a refund.