The stimulus package has some aspects that military retirees need to understand. All military retirees and in particular those retirees who also are drawing a VA disability pension should discuss the stimulus package tax plan with their tax adviser.
Retirees need to understand the effect on their tax burden.
I first became concerned when my wife found a Web site (www.walletpop.com) with an article on the stimulus tax provisions.
The article seemed to indicate that as a military retiree I would not be eligible for the tax cut. I then wrote the Association of the United States Army (AUSA) legislative liaison section and asked if this was true.
Sorting it out
The answer I received back was not a simple yes or no because the entire “package” is so confusing. I’m beginning to think I should have earned a degree in accounting to be able to understand this.
The stimulus plan includes a provision for working individuals to receive a $400 tax credit ($800 for couples). That means a working retiree will see his or her employer reduce the withheld federal income tax by $400 or $800.
According to AUSA, nonworking military retirees are not eligible for the reduced federal tax, but the Defense Finance and Accounting System will reduce the withheld federal income tax for retirees beginning in May.
If a retiree is drawing Social Security or a Veterans Administration disability pension he or she may be eligible for a $250 deduction.
However, according to AUSA, a person can receive only one stimulus benefit. Therefore working retirees who are also drawing a VA pension will end up giving some of the money back. At least that was the bottom line in the AUSA message.
Get help
Confused about how this will impact your situation?
I strongly encourage anyone who is a military retiree (and possibly anyone drawing a government-related pension) to contact a tax professional. If you’re member of AUSA, watch for the legislative newsletter for more explanation.
When I read about something like this I have to wonder if our elected officials have a clue of what they are signing up for when they approve legislation.
This is so confusing it is difficult for anyone to comprehend it and people like me who work, are military retirees, and are drawing a VA disability seem to be targets for confusion.
Having a few more dollars in my pocket might inspire me to spend a little more money now, which might help the economy.
However, when the tax bill hits in a year, I won’t be happy. But then I might blame the IRS. That wouldn’t be fair because the IRS did not invent this plan.
Regardless of the motivation behind all of this, please check with your tax adviser and be ready for the bill.
John M. House is a retired Army colonel who lives in Midland, Ga. His e-mail is housearmylife@aol.com.
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