| Veterans
News Flash 
Pay in Vets’ Work Program Ruled Tax-Free
Ruling on Compensated Work Therapy Retroactive
Three Years
January 7, 2008
WASHINGTON -- Payments provided to veterans under
two specific programs of the Department of Veterans
Affairs (VA) -- the Compensated Work Therapy (CWT)
and Incentive Therapy (IT) programs -- are no longer
taxable, according to the Internal Revenue Service.
Veterans who paid tax on these benefits in the
past three years can claim refunds.
Recipients of CWT and IT payments no longer receive
a Form 1099 (Miscellaneous Income) from VA. Veterans
who paid tax on these benefits in tax years 2004,
2005 or 2006 can claim a refund by filing an amended
tax return using IRS Form 1040X. Nearly 19,000
veterans received CWT benefits last year, while
8,500 received IT benefits.
The IRS agreed with a U.S. Tax Court decision
earlier in 2007 that CWT payments are tax-free
veterans benefits. In so doing, the agency reversed
a 1965 ruling that these payments were taxable
and required VA to report payments as taxable income.
The CWT and IT programs provide assistance to
veterans unable to work and support themselves.
Under the CWT program, VA contracts with private
industry and the public sector for work by veterans,
who learn new job skills, strengthen successful
work habits and regain a sense of self-esteem and
self-worth. Veterans are compensated by VA for
their work and, in turn, improve their economic
and social well-being.
Under the IT program, seriously disabled veterans
receive payments for providing services at about
70 VA medical centers.
SOURCE:
US Department of Veterans Affair
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