Receiving Severence Pay? Timeline?

My wife had a MEB back in Jun and it was returned in Aug with Rated 20% Discharge with Severence Pay. Her official DOS is 30 Nov 10(Tomorrow). Now i've heard conflicting stories of how the Severence Pay is paid and how it is taxed. I was hoping I could get some guidance on a few questions I have.

I actually work in the finance office on base but nobody knows much about how Severence Pay works. They gave my wife a number to DFAS to call about her severence pay. She called this morning and they told her that 1) The severence pay should be paid out by the base if they say they don't pay it out then they're to notify DFAS and they will inturn pay it out. 2) They said they don't pay it all in one lump sum. They're pay the first 12 years in one check then the other 6 years (wife had 18 years in the AF) in a seperate check. So my questions are

1) Has anyone heard about the Base paying the Severence Pay? That's news to me and my office.

2)Has anyone that's gotten Severence Pay with over 12 years received two seperate checks?

3)Also, how long does it normally take to receive your Severence Pay after discharge/final out day?

Thanks in advance for any replies.

 

[brnt]

I didn't have over 12 years, but my separation date was 30 Nov (back in 2003). I received my severance pay in the form of a single US Treasury check in mid-February 2004. I am sure the holidays slowed the process down. As far as the taxes go, your wife will fall under NDAA 2008, so it should not be taxable if it is a combat-related disability and the severance will not be withheld from VA compensation. If she is not eligible initially for tax-free severance, then I would expect 25% Federal tax withholding and perhaps state income tax withholding. For what its worth, I was in NC and had 7% state withholding. Interestingly, I never received a statement detailing gross severance pay and withheld taxes. Supposedly you can request DFAS refund any withheld taxes if you receive a VA rating for the same disability you were severanced for. I say supposedly because I sent the request and never received the funds. My W-2 did not reflect the severance pay or the withholdings that year, so I was not able to recover the withholdings at tax time either.

 

[mrgregory29]

Yea her disabilities wasn't combat related. Now I have heard that even though its taxed you get it all back at tax time.

 

[popa_top2000]

I heard that you get the tax money back on tax time too. You would think that you would get paid right after your final seperation date, I mean not everyone can get a job right away so what do they expect people to live off of.

 

[Jason Perry]

See this information paper on getting a refund of taxes on disability severance pay: Refund of Disability Severance Tax - Downloads - Physical Evaluation Board Forum

 

[hustletron]

Does anyone have a good fax number/address to send the required documents to? I am trying to recoup my taxes paid on severance pay and cant download the file above.