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VA disability compensation is nontaxable to the veteran or survivor and is not reported on any tax forms. The veteran will receive a report showing any adjustments due to cost-of-living adjustments (COLA) or other changes affecting the monthly benefit during the year.hus, for the 2012 tax year, the adjustment is $2,294 ($1,614 ($538 3) + $680 ($340 2)). (3) The adjustment is reported on the Other income line of Form 1040 as a negative number with the notation VA Disability Adjustment See Attachments included on the dotted line.
Step 2: Complete the necessary VA Form for filing. Once you have this information compiled, you will need to obtain and complete VâA Form 21-527EZâ and/or VâA Form 21-534EZâ for Special Improved benefits with Aid & Attendance. These forms can be downloaded in PDF format here: 1  VA Form 21-527EZ â(For Veterans).2  VA Form 21-534EZâ (For Spouses).tep 1: Gather the necessary documents. There is much information that needs to be gathered and prepared when applying for the Aid & Attendance Improved Pension. We have compiled a list of the documents you will need, as well as links to download some of the VA and Government Forms that you will need.