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Payments received by Federal retirees in Virginia may be taxable on 1995 Federal income tax returns filed, in 1996.
Over 140.000 Federal retirees in Virginia received their first settlement checks in March 1995 after accepting the state’s offer to settle a dispute over the taxation of Federal retirement benefits. Federal retirees who did not accept the settlement received refund checks with interest.
In January 1996, pursuant to Federal law, the Virginia Department of Taxation mailed a Form 1099-G, Certain Government Payments, reporting the amount received to all Federal retirees in Virginia who either accepted the settlement and who itemized Federal deductions for any of the years involved in the settlement (1985-1988) or received a refund with interest.
The recipient must include the following on his 1995 Federal income tax return:
Retirees who accepted the settlement should determine whether they itemized their Federal deductions for any of the years on which the settlement was calculated. If they did, they should report the amount that appears in Box 2 of From 1099-G on line 10 of Form 1040.
Retirees who received a refund
96.1%