Tax Help for Our Troops

Military trying to make filing tax returns a less stressful for troops

Troops and eligible civilians can have their tax returns filed electronically — for free — at Volunteer Income Tax Assistance centers now open at bases across Europe.

Hours, walk-in services and other offerings vary from base to base, though. So Navy Lt. Jocelyn Loftus-Williams has one universal suggestion: “The best way is to call the legal office and schedule an appointment,” she said in a telephone interview Thursday.

Army and Air Force officials also suggested that taxpayers contact individual tax centers for service details.

Loftus-Williams, the Navy region site coordinator for VITA centers, said six Navy centers in Europe and the Middle East processed about 2,900 claims last year.

“We’re going to anticipate the same number this year,” she said. There wasn’t a last-minute rush last year and Navy centers should have adequate personnel to handle late filers. But those who file earlier have more time to adjust if problems arise.

Americans living in military communities overseas generally have two months to file beyond the April 15 deadline. And some of those deployed have even longer than the June 15 date. But Loftus-Williams said there are a number of factors involved and exemptions are not always granted.

Appointments can vary from half an hour to a few hours, depending on the individual claim. Taxpayers need to bring all appropriate documents, and those vary greatly depending on circumstances. Generally, documents include W-2 forms, 1099 forms for bank interest and previous income tax returns. Those who own property or receive income from other sources need to have documents to show that.

Loftus-Williams said servicemembers who have dependents need to bring Social Security numbers − and often the actual cards – in order to claim them. Those filing for deployed spouses need to have special powers of attorney to do so.

One key change for this year is the Military Spouses Residency Relief Act. The measure, signed by President Barack Obama last year, allows military spouses to retain their state of residence when they move to new locations with their active-duty spouse. Because taxes vary from state to state, Loftus-Williams said the act would provide savings for some spouses.

She said experts are available at legal offices or tax centers to answer individual questions.

IRS has tax tips for troops and families
1. Moving expenses — If you are on active duty, and you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household.

2. Combat pay — If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.

3. Extension of deadlines — The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refunds, and taking other actions with the IRS is automatically extended for qualifying members of the military.

4. Uniform cost and upkeep — If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.

5. Joint returns — Generally, joint returns must be signed by both spouses. However, when one spouse may not be available due to military duty, a power of attorney may be used to file a joint return.

6. Travel to reserve duty — If you are a reservist, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.

7. ROTC students — Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active-duty pay — such as pay received during summer advanced camp — is taxable.

8. Transitioning back to civilian life — You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.

9. Tax information — IRS Publication 3, Armed Forces’ Tax Guide, summarizes many important military-related tax topics. Publication 3 is available for download at IRS.gov or may be ordered by calling 1-800-TAX-FORM (800-829-3676).

SOURCE: Internal Revenue Service

Be aware of changes that may affect your return
U.S. military personnel should be aware of a few changes that could affect their 2009 tax returns. According to the IRS, changes include:

-Earned income credit. The credit has increased for people with three or more children and for some married couples filing jointly. Also, the maximum amount of income you can earn and still claim the earned income credit has increased. You may be able to take the credit if you earned less than $43,279 ($48,279 for married filing jointly) if you have three or more qualifying children; $40,295 ($45,295 for married filing jointly) if you have two qualifying children; $35,463 ($40,463 for married filing jointly) if you have one qualifying child; and $13,440 ($18,440 for married filing jointly) if you do not have any qualifying children.

-First-time homebuyer credit. The credit has been extended and expanded. There are special rules for members of the U.S. armed forces.

-Hope Credit (American opportunity tax credit). The maximum amount of the Hope credit has increased to $2,500 per student; the credit can be claimed for the first four years of secondary education; generally, up to 40 percent of the credit is a refundable credit; and the term “qualified tuition and related expenses” now includes “course materials,” like books, supplies and equipment.

By Kent Harris, Stars and StripesStars and Stripes
Online Edition, Friday, February 26, 2010