The Stress-Free Tax Guide
by David Grayson, Military.com Staff Writer
The word "taxes" conjures images of stress and hair-pulling, especially for service personnel. Whether it's changing duty stations, serving in a combat zone, or collecting veterans benefits, service personnel can face unique tax situations. But taxes do not have to be a stressful experience if you have the information you need. Fortunately, there is plenty of readily accessible information both on the Web and off -- including forms you can download and places you can turn to for help. Using these resources can make your tax season easier.
Most civilians and active duty personnel must file two tax returns: federal and state. However, some states do not require active duty personnel to pay income taxes.
Generally, you must file a federal tax return if:
To determine if you must file a federal tax return, answer the IRS's Filing Requirements question tree.
There are some states that do not require military personnel to pay state income taxes. These states are: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.
Other states give special breaks on military pay. These are: California, Oregon, Idaho, Montana, North Dakota, Arizona, Oklahoma, Arkansas, Tennessee, North Carolina, South Carolina, Missouri, Iowa, Michigan, Wisconsin, Illinois, Indiana, Ohio, West Virginia, Pennsylvania, New York, Maryland, Vermont, and New Hampshire.
To determine if you have to file a state tax return, you must first determine which state you are resident of. You must pay taxes in the state where your domicile is (your permanent home). This is not necessarily where your duty station is located.
To ensure that you receive up-to-date information on whether you should file a state tax return, and other benefits, contact your state's tax office.
You can download federal tax forms from the IRS's Forms and Publications site. You can also file electronically, using the IRS's e-file system or by using one of a number of software packages. For more information on filing, see the section Filing Returns in the Armed Forces' Tax Guide.
You can download state tax forms from your state tax agency.
Deductibles help you reduce your taxes for legitimate expenses and issues. According to the IRS, there are two deductibles that are particularly relevant for active duty personnel:
There are a number of other deductions, credits and exclusions for active duty personnel, veterans, and others. These include:
For information, see the IRS's useful "tax trails."
The IRS recommends that you file your return by April 15 even if you can't pay all of the amount you owe. By filing on time, you avoid the late filing penalty. The IRS also recommends that you pay as much of the amount you owe as possible, because you reduce the amount of interest and late payment penalty that you will owe.
For more information on late payment, read the IRS's FAQs on collection.
The decision to use a professional tax preparer is a matter of personal choice. People use tax preparers for a variety of reasons:
Once you decide you want to hire a tax preparer, you then have to choose the right one. Selecting a tax preparer is no different from choosing say, a mechanic or a dentist. There are a few common sense guidelines to follow:
The following is a list of questions the IRS recommends asking a tax preparer:
Finally, after you've selected a preparer, to make the process go smoothly, make sure you have all of your records organized and accessible when you meet
The IRS recommends that you keep your tax returns, as well as supporting documentation, for three to six years.
If you experience any problems with your tax situation, or dealing with the IRS, contact the IRS's Taxpayer Advocate Service.
The IRS's Armed Forces' Tax Guide contains a full list of items includible in gross income.
in a Designated Combat Zone
Veterans' benefits administered by the Department of Veterans Affairs are not included in gross income. The following amounts paid to veterans or their families are not taxable:
For more information of veterans benefits, see the section Certain Rules for Special Employees in IRS Publication 525: Taxable and Nontaxable Income.