Tax Tips for Military Members

By Sgt. Sara Wood, USA

WASHINGTON -- Tax season has once again arrived, and military personnel should know several things to make their returns easier and more beneficial, a military official said here.

One of the most notable changes to the tax code this year is the addition of provisions for victims of hurricanes Katrina, Rita and Wilma, said Army Lt. Col. Janet Fenton, executive director of the Armed Forces Tax Council.

The provisions for hurricane victims are lengthy and complicated, so servicemembers who were affected by the hurricane should seek advice from their installation tax center or the Internal Revenue Service, Fenton said. The provisions can include extensions for tax filing and help for those who lost homes or property, she said.

Servicemembers who spent time deployed have important things to keep in mind when filing their taxes, Fenton said. For example, Iraq, Afghanistan, Bosnia and Kosovo all qualify as combat zones where military income is tax exempt, she said. For enlisted servicemembers, all income earned in a combat zone is exempt, but for officers, income is excluded up to a certain limit. For 2005, the limit for officers' tax-exempt income was $6,529 a month, she said.

Tax-exempt income is a great thing, but it has worked against some servicemembers by exempting them from important credits, Fenton said.

Two credits that military members often qualify for -- earned income credit and child tax credit -- require earned income to be claimed, she said. Starting this year, servicemembers can elect to include their combat zone income to qualify for these credits, she explained. She stressed that this income will not be taxed, but will allow servicemembers to receive credits they qualify for.

"Just because you think you didn't have earned income due to your combat zone time, it's worth your effort to go to the tax center and find out if you do qualify for these two important credits," Fenton said.

Servicemembers in a combat zone during tax season get an automatic extension to file their taxes, Fenton said. Servicemembers have six months from the time they leave the combat zone to file, she said. Servicemembers who are stationed elsewhere overseas have a two-month extension to file.

Almost every military installation offers a tax center for military, retired military and family members, Fenton said. Volunteers at the center are trained by the IRS and military legal office and can provide advice or assistance in filing taxes, she said. Returns filed through the tax center are sent electronically, and people will receive their refunds within seven to 10 days, she said.

"The installations do serve a great benefit to the military member who wants to go and make sure that they've gotten the best information they can. They've filed it, not only accurately, but taken advantage of any of the deductions and credits that they do qualify for and they may not be aware of on their own," she said.

Each installation determines its tax center's operating hours and whether people need an appointment to come in, Fenton said.

Military personnel can also get help online with their taxes, Fenton said. The IRS provides a Free File service on its Web site, which lists several tax preparation services, many of which provide free service to military members, she said. The Web site Military OneSource also provides free tax assistance to military members.

"The Internet's invaluable; it allows you to file your taxes from your own home, if you're comfortable enough to do that," Fenton said.

To prepare to file taxes, servicemembers should make sure they have their W-2 forms from the military and any other jobs they had in the past year, Fenton said. Servicemembers should also make sure they have Social Security cards for themselves and their dependents, she said.

W-2s are available on MyPay.