Concurrent Retirement and Disability Pay (CRDP) retro payment

The concurrent retirement and disability pay (CRDP) retro payments being paid to retirees rated with “individual unemployability” (IU) by the VA are taxable in the year received. CRDP always has been taxable income, as it is a restoration of taxable military retired pay. According to the Internal Revenue Service (IRS), income is considered taxable in the year it is received. This is the case even though the retro payment is to make you whole from an earlier time. Many have asked about the ability to file an amended tax return. It is not an option. Amended returns are for correcting a past mistake, or for when you paid taxes in the past that you didn’t need to pay. The CRDP retro payments for IU don’t apply to either of these situations because you were paid in accordance with the laws and policies at those times. The laws changed in 2008 to make things different, so the payment is considered a current year income payment.  [Source: MOAA News Exchange 18 Nov 08 ++]