Reminder... if you're stumbling onto this page from a websearch recently, this is an OLD POST referring to a PREVIOUS STIMULUS BILL... NOT ANY CURRENT STIMULUS BILL... for the 2009 stimulus bill update see this post: Stimulus Checks and Veterans (UPDATE)

I learned, the hard way unfortunately, that disabled veterans who depend on the VA for their income may be inadvertently cut off from the $300 that they are eligible for through the Bush stimulus "rebate" plan.
From the stimulus information page on the IRS website:
Certain Benefits Count toward Qualifying Income
Normally, certain Social Security, Railroad Retirement benefits and certain veterans’ payments are not subject to income tax. However, the economic stimulus law passed in February contains a special provision allowing Social Security recipients and recipients of certain veterans’ benefits and certain Railroad Retirement benefits to count those benefits toward the qualifying income requirement of $3,000 and thereby qualify for the stimulus payment.
This means a taxpayer who had, for example, $500 in earned income and $2,500 in any combination of the benefits described above can count those benefit payments toward his or her qualifying income to reach the $3,000 earned income requirement, even though the individual would not otherwise owe taxes on such income.
For purposes of meeting the qualifying income requirement, the following benefits need to be reported in any combination on Line 20a of Form 1040 or Line 14a of the Form 1040A.
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Social Security benefits reported on the 2007 Form 1099-SSA, which people would have received in January 2008. People who do not have a Form 1099 may estimate their annual Social Security benefit by taking their monthly benefit, multiplying it by the number of months during the year they received the benefits, and entering the number on Line 20a of Form 1040 or Line 14a of the Form 1040A. Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment.
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Railroad Retirement benefits reported on the 2007 Form 1099-RRB, which recipients would have received in January 2008.
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The sum of veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans Affairs in 2007. People are allowed to estimate their annual benefit by taking their monthly annual veterans’ benefit, multiplying it by the number of months during the year they received benefits, and entering the number on Line 20a of Form 1040 or Line 14a of the Form 1040A.
People should note that Line 20a of Form 1040 and Line 14a of the Form 1040A are designated for Social Security. To qualify for the economic stimulus payments, these lines should also be used to include any qualifying Railroad Retirement or veterans’ benefits.
Disabled veterans normally do not have to list their compensation on tax returns due to the fact it is not considered income under any of the IRS regulations. If disabled veterans who do not meet any of the other requirements do not list their compensation on this line they may not receive the $300 that they are eligible for with this stimulus plan.
Unfortunately neither the
1040 or
1040A instructions mention this detail for disabled veterans. The
1040EZ instruction don't appear to mention anything about it either.
For those who have already filed there are instructions on how to file an amended return (form
here, and instructions
here) to add the missing information.
The IRS agent I discussed this issue with told me to follow the 1040X instructions carefully (making sure not to forget the tax year the amended return applies to at the top, for example). If the only change to you're return is to note your veterans disability compensation most of the form can be left blank, but definitely read the instructions to make sure you don't skip necessary portions.
The key portion for them will be Part II which allows for an explanation of changes. The IRS agent recommended something along the lines of:
No change in taxable income, deductions, credits, or tax liability but I learned after I filed that in order to qualify for the stimulus rebate that I needed to list my Veterans Disability Compensation on line 14A of the 1040A in an area normally used for Social Security benefits. My VA Compensation payments for 2007 were [fill in your VA compensation for the year here] for the whole year.
The agent informed me that they did not yet have any set protocols for dealing with questions on this issue and overwhelmingly relied on the information on the IRS
stimulus page and his knowledge on filling out amended returns to answer my question.
One thing he did say to check prior to filing an amended return was to call the IRS and check to make sure your original return had "posted" first to avoid having the amended return being processed prior to any potential issues with the original return being checked first. Having both in at the same time unprocessed can cause problems apparently. The
IRS contact number is:
Telephone Assistance for Individuals:
Toll-Free, 1-800-829-1040
Hours of Operation: Monday – Friday, 7:00 a.m. – 10:00 p.m. your local time (Alaska & Hawaii follow Pacific Time).
If you have any specific questions for your situation I'd highly recommend calling them (the hold times do suck, by the way) or talking to your tax professional. Disclaimer: I have no idea what the hell I'm talking about and offering a personal opinion and do not claim nor intend to imply I have any idea of what I'm talking about when it comes to tax regulations, codes, or anything legal in any way shape or form.
One thing I can say though is that the IRS and the feds in general did a lousy job of making sure vets were aware of this change. Never before have they had to fill out this portion of the form for their veterans benefits... and nothing in the instructions mentions any change... and no notice was sent to them. This is just bad form. Our tax dollars at work.