- Managing Stress
While none of us particularly enjoys having to file and pay taxes it is an important part of our financial planning. Our Tomorrowsmoney.org website provides numerous resources on tax-related issues including: ways to save time and money when preparing taxes, how to find someone to help you with tax preparation, and 10 great things to do with your tax refund.
There are practical sources of tax assistance you may be able to take advantage of as a servicemember.
Tax Preparation and Filing Assistance for Military Families
No one likes paying taxes and most people do not relish the prospect of having to prepare their tax returns. There is tax assistance available for military servicemembers and their families.
The IRS provides free tax preparation and filing assistance through the Volunteer Income Tax Assistance (VITA) Program. Military-based VITA sites provide free tax advice, tax preparation, return filing and other tax assistance to military members and their families. VITA volunteers are trained to address military-specific tax issues, such as combat zone tax benefits.
Military commanders support the program by detailing members of the military to prepare returns and by providing space and equipment for tax centers. The IRS supports these efforts by providing tax software and training.
To receive this free assistance, you should bring the following records to your military VITA site:
• Valid photo identification
• Social Security cards for you, your spouse and dependents or a social security number verification letter issued by the Social Security Administration
• Birth dates for you, your spouse and dependents
• Current year’s tax package, if you received one
• Wage and earning statement(s) -- Form W-2, W-2G, 1099-R
• Interest and dividend statements (Forms 1099)
• A copy of last year’s federal and state tax returns, if available
• Bank routing numbers and account numbers for direct deposit
• Total amount paid for day care
• Day care provider’s identifying number
• Other relevant information about income and expenses
If your filing status is Married Filing Jointly and you wish to file your tax return electronically, both you and your spouse should be present to sign the required forms. If it isn’t possible for both to be present, a valid power of attorney that allows tax preparation can be used to sign and file the return.
If Your Servicemember is Deployed
If your active military member or reservist is called to active duty you may qualify for two tax breaks. If you can demonstrate that you're not able to pay your taxes due to your deployment and you are serving in a combat zone you get an automatic extension to file your taxes. You have six months from the time you leave the combat zone to file. More information is available at www.irs.gov or by calling the IRS at 800.829.3676 and asking for Publication 3, "Armed Forces' Tax Guide." If you are a Guard member called to active duty and you serve in a declared combat zone during your deployment, you also may be approved to exclude your military pay from your gross income when you file taxes. If you or your spouse have served, or are currently serving, in a combat zone, your military income is tax-exempt. For officers there is a limit on income exempt from taxes (up to $6,529 a month).
Depending on your taxable income, you may also qualify for the earned income tax credit (EITC), which is also available for qualifying civilians. The earned income credit reduces your overall tax bill. You may be eligible for a full or partial credit if:
- You have two or more dependent children and earn up to $35,263 (excluding your military housing and combat duty pay). If you are married and filing jointly, you can earn up to $37,263.
- You have one dependent child and earn up to $31,030, or $33,030 if you're married and filing jointly.
- You have no children and earn up to $11,750 or $13,750 if you're married and filing jointly.
You may want to choose to include your combat zone income to qualify for the earned income tax credit, and child tax credit. It is important to know that the income will NOT be taxed but will simply allow you to receive tax credits for which you qualify using your combat zone pay. Learn more about the EITC.