Income Development Response
If you receive a letter from the VA asking you to explain the discrepancy, or difference, between income you reported to the VA and income the IRS reported to the VA, here is how the response should look.
Financial Account Numbers
The letter will provide the income you reported to the VA. The letter will then provide income information provided by the IRS for the prior year. So, if you applied for benefits in 2020, the VA letter will report income the IRS provided for 2019.
Your first step is to determine which accounts the VA is referencing based on the account numbers they’ve provided. Sometimes this will be easy and other times you may not know what accounts the VA is referring to. Possibly, you will need to research with your different financial institutions to determine which of your statements correspond to the account numbers provided in the VA letter.
If You Agree With The VA
You will then agree or disagree with the information the IRS provided. For example, if the IRS reported annual income that corresponds to retirement income, and you reported this income on the application, you will then agree with the VA. You would write on VA Form 21-4138: “With regards to the GE Pension, I agree with the information provided in the VA letter. I want to point out that I reported this income on my original application on VA Form 21P-0969.”
If You Disagree With The VA
More often than not, you will be disagreeing with the VA. This is because you reported income expected over the next 12 months on the application and the VA is asking about income received in the prior calendar year.
Most people applying for aid and attendance pension are rapidly depleting their savings, including IRA accounts, money market accounts, etc…Therefore, it makes perfect sense that the income you reported for the next 12 months would be less, and possibly much less, than the income you received the prior year.
Unfortunately, it is not enough to explain this to the VA. You need to provide financial statements and/or letters from the financial institution.
If the account in question has been closed or is at a $0.00 balance, you should get a letter from the financial institution that reports: 1) the date the account was closed, 2) the date the account had a $0.00 balance, and 3) that no income is expected from the account.
You would then respond to the VA by writing on VA Form 21-4138: “With regards to account 123456, that account was closed on November 20th, 2019. It has a zero balance and no income is expected. See included letter from Wells Fargo. I used the money from this account to pay for my medical expenses and other living expenses.”
If the account in question is still open, but depleted, and therefore income is less than the prior year, you need to send current statements that show the value of the account and the gross monthly income received from the account. Please keep in mind that this information should have been submitted with the original application.
If you can provide documentation to the VA that the income currently received is less than the income received in the prior year, the VA will award benefits. Providing letters from the financial institutions is the best evidence you can provide.