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Members of the military and their families often qualify for special tax benefits. For example, members of the armed forces don’t have to pay taxes on some types of income. In addition, special rules could lower the tax they owe or allow them more time to file and pay their federal taxes.

Here are some of these special tax benefits:

  • Combat pay exclusion. If someone serves in a combat zone, part or all of their combat pay is tax-free. This also applies to people working in an area outside a combat zone when the Department of Defense certifies that area is in direct support of military operations in a combat zone. There are limits to this exclusion for commissioned officers.
  • Deadline extensions. Some members of the military – such as those who serve overseas – can postpone most tax deadlines. Those who qualify can get automatic extensions of time to file and pay their taxes.
  • Earned income tax credit. Military members who get nontaxable combat pay may choose to include it in their taxable income. One reason they might do this is to increase the amount of their earned income tax credit. People who qualify for this credit could owe less tax or even get a larger refund.

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WASHINGTON — U.S. Armed Forces members who served in the Sinai Peninsula of Egypt may qualify for combat zone tax benefits retroactive to June 2015, according to the Internal Revenue Service.

Under the Tax Cuts and Jobs Act (TCJA) enacted in December 2017, members of the U.S. Army, U.S. Navy, U.S. Marines, U.S. Air Force, and U.S. Coast Guard who performed services in the Sinai Peninsula can now claim combat zone tax benefits. Eligible service members should review Publication 3, Armed Forces’ Tax Guide, available on Read More

As we near the end of the 2018 filing season, it is worth reflecting on the challenges taxpayers face in complying with complex tax law provisions. In my 2017 Annual Report to Congress, I identified IRS customer service and information provided to military taxpayers as one of the Most Serious Problems facing taxpayers. In this blog, I will discuss the needs and preferences of military taxpayers and recap some of my recommendations on how the IRS can substantially improve its service to this taxpayer population. Read More

The IRS reminds members of the military and veterans that they may qualify for the earned income tax credit. This credit benefits certain people who work and have earned income that’s less than $53,930.

A tax credit usually means more money in the taxpayer’s pocket. The EITC can reduce the amount of tax someone owes, but it might also result in a refund. Here are some things members of the armed forces should know about this credit. These are all specific to the military: Read More

Do you plan to donate your services to charity this summer? Will you travel as part of the service? If so, some travel expenses may help lower your taxes when you file your tax return next year. Here are several tax tips that you should know if you travel while giving your services to charity.

• Qualified Charities.  In order to deduct your costs, your volunteer work must be for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are qualified, and do not need to apply to the IRS. Ask the group about its IRS status before you donate. You can also use the Select Check tool on to check the group’s status. Read More

Pen and Paper_HiResLate last summer I was approached by several members of the local law enforcement agencies with letters from the IRS.  It seems that in 2009 one member of the force had a friend of a friend that was getting him back refunds in the mid 5 figure range every year.  Of course, he wanted to share his largesse with his co-workers.

You know the rest of the story, I’m sure.  The tax preparer had been taking large, fraudulent deductions on Schedule C forms against the officers off duty 1099MISC income, giving them losses that exceeded their W2 income.  In many cases this made them eligible for EITC and other credits even though they married couples actually had income in excess of $100K.  And all the returns were done on at home software indicating the return had been self-prepared.

Of course they all got audited for 2009-2011 and once I was done they all owed in excess of $30K plus penalties and interest.  Well, I got mad!  Did I mention I’m a retired law enforcement officer from this same department?  I filed my first sets of complaints against another tax preparer and assisted the clients in doing the same.  The clients had the information on the preparer as several had written him checks.  A simple internet search gave me the rest of the details I needed.

So, we all filled out and mailed our IRS Form 14157 (for me) and 14157A (for the clients).  My clients all got on installment plans and we were able to get the penalties for 2009 abated in most cases under the First Time Abatement program.   Read More

With an increasing number of Veterans returning from serving our country and the previous generation getting old the Veterans Administration (VA) is granting more and more disability ratings for our service members and former service members.  If you are a Tax Professional who prepares returns for people who served or are serving in the U.S. Armed Services or you are a Veteran please take a few minutes to look at this step-by-step guide to the best way to make sure Veterans get the full amount of their tax refunds.

Preparing A Return For A Disabled Veteran