SGT. SHAFT: Can I be taxed on my disability pay?

Dear Sgt. Shaft:

I know that my over 50 percent disability pay is not federally taxed, but I heard that some states and cities can tax my disability pay when residing in their state? Is this true of any of the 50 states? I also saw that this article I read was written published on Oct. 1, 2007; “is it still valid your informational source”? Because I hear in August 2011, they’ll be making some modifications, and if so; please send me some sources to read up on; thank you.

Kind regards,
B.D.M,
Via the Internet

Dear B.D.M.:

My source at the Non-Commissioned Officers Association (NCOA) tells me that you are quite correct that VA compensation is not taxed by the federal government.

In fact, IRS Publication 907 provides an explanation on VA disability benefits that simply states: Do not include disability benefits you receive from the Department of Veterans Affairs (VA) in your gross income for tax purposes.

Most states use the annual adjusted gross income information from an individual’s federal tax return and therefore the disability benefit would not be taxed by the state.

In addition to the exclusion of VA disability benefits, the pamphlet clearly states, “Do not include in your income any veterans’ benefits paid under any law, regulation, or administrative practice administered by the VA.” IRS Publication 907 is available and can be reviewed at https://www.irs.gov/publications/p907/ar02.html#en_US_2010_publink10008638.

I would suggest that you contact your state’s Department of Revenue or your personal tax preparation office since you did not provide your specific state and city to address your taxation concerns.

You are quite right to question the validity of any old information on the Internet, especially when on issues where state and federal laws change annually. The Internet has a lot of material that has been interpreted by people of all backgrounds and levels of education that we in the military have called “barracks lawyers.” Their information may not be accurate and certainly should not be considered as the basis of a dispute with agencies like IRS and state revenue officials or in a legal proceeding.

Shaft Notes

• The Sarge recently received this heads up from Vietnam buddy Mike Hughes requesting that I share the following information with my readers: The Servicemembers Civil Relief Act (SCRA), enacted in 2003, provides certain protections on mortgages and foreclosure actions for active military personnel and for a time after they are released from active service. Those protections are outlined in Section 303 of the SCRA.

Unfortunately those protections are not currently included for surviving spouses for those service members who die in military service for service connected reasons. There have been several instances where lending institutions have immediately started foreclosure procedures upon the death of a service member, pushing the surviving spouse and family out of their homes with no recourse.

Rep. Bob Filner, California Democrat, has introduced legislation, HR 1263, to amend the SCRA to provide surviving spouses with this same protection as the service member. It was introduce on March 30, 2011, and referred to the Committee on Veterans Affairs with no co-sponsors.

The House Committee on Veterans’ Affairs recently held a seminar titled, “Educating the Financial Service Industry on the Servicemembers Civil Relief Act and the VA Loan Guaranty Program.” The seminar was designed to educate attendees from the financial industry about the Servicemembers Civil Relief Act (SCRA) and for participants to discuss best practices in outreach and compliance in an open forum.

“It is our duty, collectively, to make sure that when one of our men or women in uniform must leave their home to defend this nation, their mortgage is in full compliance with the law and that the service member is fully aware of their rights and responsibilities under the law,” said Rep. Jeff Miller Florida Democrat, chairman of the House Committee on Veterans’ Affairs.

Before the open forum session, Col. Shawn Shumake (U.S. Army), director of the Office of Legal Policy at the Department of Defense (DoD), discussed improvements to SCRA education within the department, including the expanded use of new media to reach younger service members.

Mike Frueh, acting director of the Loan Guaranty Service program at the Department of Veterans Affairs (VA), presented the safeguards the VA has put in place for veterans under SCRA who have mortgages and noted the improvements to the guaranty program over the past 10 years for America’s veterans.

During the question-and-answer portion of the seminar, several major financial institutions thanked the participants and expressed their shared hope to work more collaboratively with the government in the future.

“It is my hope that we never have to hold another hearing on compliance with SCRA or on compliance with VA Loan Guaranty laws and regulations. I want to thank the members of the financial services industry for their participation in this seminar and for their efforts to better recognize the sacrifices of our nation’s service members and their families,” Mr. Miller said.

• Veterans are invited to meet face to face with dozens of top employers at the Friday, May 13th, Corporate Gray Job Fair for the military community at the Hilton Norfolk Airport Hotel, 1500 North Military Highway, Norfolk, VA 23502-1813. Business attire recommended.

Job fair hours are 10 a.m. to 2 p.m. with free, employment-related seminars starting at 8 a.m. and 9 a.m.

Some of the many employers registered to date include: Lockheed Martin, SAIC, General Dynamics, URS, Amazon, Aviation Institute of Maintenance, SRC, Nancy Chandler Associates Realtors, ECPI College of Technology, L-3 MPRI, Prince William County Fire Department, Durham Police Department, Homeland Security Inc., Ogden Air Logistics Center, United States Secret Service, VSE Corp. and more.

For directions and to register for the job fair, please visit www.CorporateGray.com.

• Send letters to Sgt. Shaft, c/o John Fales, P.O. Box 65900, Washington, D.C. 20035-5900; fax 301/622-3330, call 202/257-5446 or e-mail sgtshaft@bavf.org.