Hello and thank you for using Just Answer,
As a tax professional I worked by Parris Island,Ft Benning, and Hunter Army Airbase so I have dealt with this numerous times.
Your situation depends on a couple of items. First when your determination was made for disability (VA determination date more important than next) and second when the payment was made to you.
If the VA determination date was retroactive to the severance payment then this issue falls under the "St Clair Letter". Many times a service member is discharged for medical but the disability determination letter is not given till later (sometimes years). If the determination letter makes the determination retroactive, the service member goes back and files amended returns for the year(s) of previous payments that were taxable but now are not.
The 1040x is used only for a previous return that was filed and showed taxable income if the determination is just made later in the year and the tax return has not been filed yet then the correction is shown on the original return. Now a days the payment office is better at making the change quicker and the W2 correctly reflects the amount that is taxable.
Let's assume that the payment was made retroactive to a past year. A 1040X is filed with a copy of the determination letter showing the retroactive date, a copy of the calculations used to determine how much is really taxable, a copy of the original W2, and a statement citing St Clair vs US (this relates back to a service member by that name that went to tax court to be able to recoup taxes paid after the timeframe for the same).
If you have a problem with this yourself then you need to use a tax professional (you can go back where you went before but tell them you want someone that is familar with the St Clair for military). (They should know that the amount that is not taxable goes on Line 21 as a negative.)
Now all this is not used if the payment is not covered by a retroactive date on the VA. DFAS will most probably not issue you a corrected W2. I have heard of some getting one but......
You listed Texas as your state, but if you were in another state and had to pay tax on that income then wait until federal is complete and then deal with state.
Please just respond to me (DO NOT RATE) if I have misunderstood your situation or you want to add more info. I will continue to work with you no matter what, but a poor rating only reflects badly on me and does not address the situation.