Compensated Work Therapy Payments for Veterans are Now Tax-Free

Veterans who receive compensated work therapy payments from the Department of Veterans Affairs no longer have to pay taxes on those payments. Previously, the IRS considered these payments as taxable income. But now, the IRS has agreed with the findings of a recent Tax Court decision ruling that these payments are non-taxable. Veterans who paid tax on these payments in the past three years can file an amended tax return to claim a refund of their taxes.

More information:

• Certain Payments to Disabled Veterans Ruled Tax-Free; Some May Be Due Refunds (IR-2007-198)
• Revenue Ruling 2007-69 (pdf) from the IRS Web site