The most wonderful time of year is followed by what feels like the most complicated time of year for military families. Tax Season. There are unique challenges to taxes each after year for military families. Permanent Changes of Station create a state or even country changes mid-tax year which is just oh so much fun. Homeownership for military families often exists across state lines. If the non-active duty military spouse works there is the challenge of filing state taxes in the state of residence instead of the state you are living in. Get prepared this season with these tips.
Where To Start
If you have complicated taxes and think you will need help, find a trusted Certified Public Accountant (CPA) or Enrolled Agent (EA) early. Tax preparers with experience and knowledge are typically booked in advance and unable to take on new tax clients during the tax months of January through April. If you find someone you really want and they are not able to help you file by the April deadline, you may be able to file an extension for filing in the offseason – just make sure you don’t owe more money as there will be interest added from the date the payment is due (Tax filing day).
What is an EA?
An Enrolled Agent, or EA, is a tax practitioner authorized by the federal government to represent individuals for audits, provide tax advice, and file tax returns. EAs are authorized only after they pass a three-part test, apply to the IRS, pass a background check, and complete 72 hours of continuing education every three years.
What is a CPA?
A Certified Public Accountant, or CPA, are professionals in accounting who have passed a four-part exam and completed all the state-required training and education. Each state differs on what is required for continuing education but typically most require at least 40 hours of education per year. CPAs practice as accountants, forensic accountants, and tax consultants but also work as auditors, business advisors, and financial planners.
Free Tax Filing
There are many options for filing for free with the IRS for military families.
One option is a Free File on the IRS website. The online platform allows you to prepare and file federal income tax online. There are two types divided by income amount. For those who have an income of $72,000 and below there is free federal tax filing on the IRS partner site, state tax filing which has free some options, and guided preparation that does the calculations for you. The other option is for those who have income above $72,000 with electronic forms completed online but does require basic calculations with limited guidance and does not include state tax filing.
Miltax is a free tax service for the military offered by Military One Source. The online preparation and e-filing software is available from mid-January through mid-October of the tax year and is specifically designed to address the specific and unique challenges of the military lifestyle. You will need a Military OneSource account to access the software, and it is free to set up the account.
Volunteer Income Tax Assistance, or the VITA program, may be located at your base or installation. These are tax specialists who understand and are trained to specifically complete taxes for military families and their unique tax situations. VITA is located in both CONUS (within the United States) and OCONUS (outside of the United States) locations. Check for the closest location to you here.
What To Gather
When preparing for taxes make sure you have these labeled and organized:
– Copy of the previous year’s tax return if you have one
– Social security numbers for everyone included on the tax return
– All forms of compensation including social security benefits, unemployment completed, income for rental, real estate, or investments
– Traditional income statements including W2, 1099-INT from the bank showing any interest earned through the year, 1099-G showing refund or credits to offset taxes, and 1099-DIV or 1099-R with dividends earned from retirement accounts
– Any work-related statements – purchases for small business or mil
Filing An Extension
If the military service member is serving in a combat zone or a contingency operation, you are able to file an extension for filing your tax return. The extension is for 180 days after you leave the combat zone or when the operation is no longer considered a contingency operation.
If you are living outside of the United States or Puerto Rico, you qualify for an automatic 2-month extension. If you need more time than the 2-month extension, you can get an additional 4 months but interest will be charged on the amount owed from the date the amount is due.
If you just need time to complete taxes, complete IRS Form 4868 to file an extension. With this extension, you will still owe interest on any amount owed to the federal government from the due date of payment (typically the original filing deadline).
While tax time is full of math, paperwork, and sometimes confusion, being prepared and getting help early will allow for a less stressful tax season.
I am a retired US Air Force Chief Master Sergeant (E-9) with over 30-years on active duty. I served many years while on active duty as a Volunteer Income Tax Adviser (VITA) and helped hundreds of fellow service members file their taxes. Additionally, after retiring, I also served as a VITA with several county agencies helping senior citizens file their taxes. I have pretty much seen it all; not everything, but enough to offer some advice…
This article gives a lot of wonderful advice so I will not expound on it. What I will do is warn you off from all those “fly-by-night tax accountants” that pop up in strip malls across the country.
If they were not there last month, they probably will not be there if you are called in for an audit.
The sure flag that you need to stay away is if they offer you an immediate tax refund. What they do is file your taxes, and have you sign a deposit slip to have your return sent to their account. They pay you a portion of your return, keeping a percentage for the service.
In fact, when filed early, the IRS pays out a refund very quickly, especially when filing a short form. I am sure the various branches still have the VITA volunteers helping you fill out your return for free.
The worst case that can happen to you is that the “fly-by-nighters” apply for credits that you do not qualify for and this tactic gives you a false impression of a very high return, of which they take a percentage of for their own.
You can Google all the different ways that frauds are made in the preparation of taxes.
If you do fall victim to one of these schemes, the fly-by-night accountants will have long since closed up shop and are nowhere to be found. You will be called into the IRS to explain the return and the IRS is only concerned that you signed the return and you are ultimately responsible for all taxes, penalties, and interest due.
Be smart, be patient, file your taxes early and your tax refund will soon follow.