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Tax guidelines, new breaks for military taxpayers
By Kay
Bell • Bankrate.com
Filing taxes is stressful enough under normal circumstances.
When you're a member of the armed forces, your tax situation can be
even more difficult -- especially if you're serving overseas or in
a combat zone.
U.S. military personnel, active and reserve, are not
exempt from taxes. You must pay any federal taxes owed by the April
filing deadline, even when stationed abroad.
But there are some special rules that apply to military
taxpayers, both those stationed domestically and those serving in
hazardous areas. And recently enacted legislation (signed into law
on Veterans Day) has enhanced some tax breaks for service personnel
and their families.
Paperwork, not payment, relief
First, a look at tax-filing requirements. While the IRS expects
its payments by April 15, members of the military have the same
right as civilian taxpayers to postpone sending in 1040s for up
to four months. How a service person gets the extension, however,
depends on where he or she is stationed.
Military personnel in the United States or Puerto
Rico must file Form
4868 to get until Aug. 15 to send in returns. Submit the form
by the April deadline via mail, phone or the Internet. Any tax you
owe must accompany the form if you send it by the postal service.
However, if you pay your tax bill by credit card or by authorizing
an electronic withdrawal, you do not have to submit the form itself.
You won't get any approval notice from the IRS after
you send in the form. However, the agency can deny a request that
isn't filed by the April deadline. In this case, the IRS will inform
you of the denial.
If you are stationed outside the United States or
Puerto Rico, or your tour of duty takes you abroad for the entire
filing period, you automatically get two more months to file --
and pay -- your taxes. No need for an additional form; just send
in your return and any tax due by June 15. Be sure to write "Taxpayer
Abroad" at the top of your 1040 and attach a statement explaining
your international posting situation. If you still need more time,
then you'll have to file Form 4868 to extend your tax return deadline
until mid-August.
Military filers, regardless of where stationed, can
request an extension beyond August by submitting Form
2688 or by writing a letter to the IRS. But make sure you've
previously filed the necessary forms. Except in undue-hardship cases,
this additional extension to Oct. 15 will be granted only if Form
4868 has already been filed.
And remember that all extensions are granted for the
paperwork only. If you owe tax, it must be paid or arrangements
made to meet your bill by the April deadline. You will be charged
interest on any unpaid tax not sent by the regular due date and
could face penalties for late payment.
Where to file
Where you must file also depends on your posting.
If you're at a domestic base, send your return and
payment to the IRS center that processes materials for your posting.
For example, if you are stationed in Texas but your permanent residence
is in California, you would send your return to the service center
for Texas. Service center addresses are listed in the instruction
booklets for each of the tax returns.
If you are stationed overseas and have an APO or FPO
address, file your return with the service center in Philadelphia.
Combat zone special rules
Tax guidelines change dramatically, however, for soldiers and sailors
in war settings.
If you're serving in a designated combat zone or hazardous
duty area, much of your military pay and reimbursements will be
exempt from federal income tax. For commissioned officers, the monthly
exclusion is capped at the highest enlisted pay, plus any hostile
fire or imminent danger pay received. For 2003, this limit is $5,882.70.
The military paymaster should take care of this delineation for
you, but you can find a listing of exactly what type of compensation
or benefit is deemed taxable or exempt in IRS
Publication 3, Armed Forces Tax Guide.
You'll also automatically have later deadlines for
filing tax returns, paying taxes, submitting refund claims or taking
other actions with the IRS. The basic extension period is 180 days,
but it might be lengthened depending upon when in the tax season
you were shipped to a combat zone.
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