Compensated Work Therapy Payments

As the result of a U.S. Tax Court decision, the Internal Revenue Service (IRS) issued Revenue Ruling 2007-69. This Revenue Ruling provides that payments under the Department of Veterans Affairs (VA) Compensated Work Therapy (CWT) program are exempt from federal income tax as veterans' benefits. Disabled veterans who paid tax on these benefits in the past three years can now claim federal refunds.

The exemption for CWT program payments also applies for Wisconsin income tax purposes. Disabled veterans who paid Wisconsin income tax on CWT benefits may file an amended return to claim a refund of tax paid on these benefits.

A Wisconsin amended return (Form 1X) must generally be filed within four years of the original due date of the return. For example, an amended return for 2004 (original return due April 15, 2005) must be filed on a 2004 Form 1X by April 15, 2009. Form 1X is available from the department's website at www.revenue.wi.gov/html/formpub.html.

The CWT program administered by the VA provides assistance to veterans unable to work and support themselves. Under the program, the VA provides a range of vocational rehabilitation services. The goal of the program is to assist in restoring the physical and psychological functioning of ill or disabled veterans.

Page last updated April 17, 2008