Question

• Sam Wagner is a retired member of the U.S. Armed Forces.
• He received Form 1099-R from the Defense Finance & Accounting Service.
• Form 1099-R indicates $22,000 in box 1and box 2a.
• Sam is considered 100% disabled and received a letter of determination from the Department of Veterans Affairs (VA).
• He received a payment in the amount of $6,000 from the VA for disability.

1. The payment Sam received from VA is taxable. True False

2. Which of the following documents are issued by VA for disability payments?

A. Form W-2, Wage and Tax Statement B. Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. C. Forms W-2 or 1099-R, depending on the type of disability D. No form is required to be issued

Answer 1

1)

The disability amount paid by VA is not taxable.

Hence the statement is FALSE.

2)

W-2 form is used to report the wages paid to employees and taxes withheld.

Form 1099-R is used to report distribution from pensions, IRAs, Annuities etc.

Since disability benefits are not taxable, therefore the VA department does not need to issue W2 or 1099-R forms for disability payments.

Hence the option (d) is correct.