Volunteer Income Tax Assistance Program

How a New State Residency Bill Benefits Military Spouses

Military spouses may soon find filing taxes a little less confusing if H.R. 5428, the Military Residency Choice Act, is signed into law. The bill aims to make establishing and maintaining state residency much easier. Currently, the law can be very confusing and many families may be filing their taxes incorrectly without knowing it.

Under the Service Members Civil Relief Act, military service members can keep their residency in one state no matter where the military sends them. For the purposes of filing taxes, that means that if a service member enlisted in the Navy in Alabama and is currently stationed in Virginia they only pay income tax to Alabama, not Virginia.

It isn’t that simple for military spouses however. Prior to 2009, military spouses had to change their residency every time they moved to a different state with their service member. This made filing taxes and voting difficult. It prevented many military spouses from finding employment after each move.

In 2009, the Military Spouse Residency Relief Act (MSRRA) made maintaining residency in one state possible for military spouses. A military spouse simply had to establish residency in one state and was then able to keep that no matter what state the military sent them to next. The MSRRA does not allow military spouses to claim the residency of their service member however unless that was their state of residency when they were married. It also does not allow military spouses to randomly decide which state they will claim residency in.

Under the proposed Military Residency Choice Act military spouses will be able to use the same state of residence as their service member even if they have not lived in that state.

They will also be able to vote through absentee ballot for that state as well. This does not let military spouses keep their driver’s license from that state though; that is a state by state case.

H.R. 5428 specifically states:

The spouse of a service member may elect to use the same residence for purposes of taxation as the service member regardless of the date on which the marriage of the spouse and the service member occurred.

This bill is only in the early stages of the process of becoming law. It was introduced in the House of Representatives and referred to the House Committee on Veterans’ Affairs. If it does pass, it will go into effect 90 days after the enactment. That doesn’t help military spouses for this tax season, but perhaps by next year it will have passed.

In the meantime, ask yourself what the most beneficial option will be for your family.

Is your spouse’s state of residency one with harsher tax laws? Is it worth it to change your residency?

Seven states do not have personal income tax including: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. New Hampshire and Tennessee also do not have income tax, but they do have tax interest and dividends.

If you earn an income and your current residency is in Florida and your military service member maintains Alabama as their residence, it could be beneficial to maintain a Florida residency where there is no income tax. While the MSRRA and the proposed Military Residency Choice Act are intended to make taxes easier for military spouses, it may be wise to consult a tax specialist if you have questions.

Remember, you cannot choose a random state to be your state of residency. You must establish residence by living in that state and maintaining sufficient contacts in that state. That can include owning property in the state, holding professional licenses in that state and voting there as well.

What do you think of the proposed Military Residency Choice Act?

Military Savings for Tax Time

By Michelle Volkmann

Military couples don’t have to spend money on tax preparation software. There are plenty of free and discounted options available for service members, military spouses and retirees.

Here is a list of military savings for tax time.

Volunteer Income Tax Assistance (VITA) Program

Have you heard of the Volunteer Income Tax Assistance (VITA) Program? This program operates free tax preparation centers at military installations around the world. The VITA offices are open to active duty service members, including National Guard and Reserves, military dependents and retirees.

Since the Armed Forces Tax Council partners with the IRS for this program, volunteers received IRS certified training. They are ready to help military families with tax preparation and answer common tax questions at these centers.

VITA is a great option for young service members who need help filing their taxes.

If you are planning to e-file your taxes at a VITA office, bring the following documents to your appointment:

Valid photo identification
Social Security cards for you, your spouse and dependents.
Birth dates for you, your spouse and dependents
Your wage and earning forms, such as Forms W-2, W-2G, and 1099-R.
Interest and dividend statements (Forms 1099).
A copy of your last year’s federal and state tax returns, if available.
Routing and account numbers for direct deposit of your tax refund.
Total amount you paid for day care and the day care provider’s identifying number. This is usually an Employer Identification Number or Social Security number.
Other relevant information about your income and expenses.

If you are married and filing a joint return, both of you need to sign the return.

What if my service member is on deployment?

If your service member is on deployment, you have a few options. If there’s a VITA site at their location, they can e-file their taxes there.

If you, as the military spouse, plan to file a joint return, bring a valid power of attorney when doing your taxes. The IRS recommends using Form 2848, Power of Attorney and Declaration of Representative when completing your taxes.

If your service member is in a combat zone, the military spouse can file a joint return with “a signed statement explaining that the other spouse is in a combat zone and unable to sign,” according to the IRS.

Click here to see the list of Volunteer Income Tax Assistance offices around the world.

“MilTax” Software Available Through Military OneSource

If you feel confident that you can complete your taxes online, consider e-filing using Military OneSource’s free filing service, MilTax. This service allows military members to complete and electronically file federal and up to 3 state tax returns, according to Military OneSource.

If you have questions about this tax service or about your own tax returns, please call 1-800-342-9647 and ask to speak with a Military OneSource tax counselor. Trained tax counselors are available 7 days a week from 7 a.m. to 11 p.m., EST. For online assistance with questions about deductions, exemptions and filing deadlines, send inquiries to TaxQuestions@militaryonesource.com.

This service is available to active duty, National Guard and Reserve, and spouses. Users must create a free account with Military OneService before taking advantage of this military savings.

TurboTax Military Edition Software

Active duty and reservists, who are USAA members, can get TurboTax Deluxe Online Federal for free. All USAA members can save up to $20 on TurboTax federal products.

Visit USAA’s website for more information the TurboTax Military Edition Software.

Did we miss any other tax preparation services that offer military savings? Tell us about it in the comments section.

How to Spend Your Tax Refund Wisely

By Kimber Green

It’s that wonderful time of year: tax season.

I’m always such a procrastinator when it comes to taxes. I don’t wait until the last minute, but I put it off as long as I can. The first time my husband and I filed taxes together he insisted on going to a tax preparation business out in town. I’ve always done my own taxes so I was quite mad when we finished up and I saw our bill. I’m still annoyed by it so I continue to procrastinate every year.

My husband is adamant that we use a tax preparation company since they offer a guarantee that if something is wrong, they will fix it. Having special military pay and working in tax-free zones for part of the year can all add up to some tax confusion so having the comfort of knowing a professional is doing the paperwork is a bit of a relief.

Recently I discovered that H&R Block has offices on more than 100 military bases offering free tax services. You have options for filing your taxes for free too. The Volunteer Income Tax Assistance Program offers “no-cost tax advice and preparation, return filing and other tax assistance to military members and their families” and through Military OneSource, you can use H&R Block At Home Online Tax Return Preparation. If you want help, you can go in person or call their help line 24/7 until June or if you want to do it yourself at home you can too. You don’t need to spend money to file your taxes.

However you choose to file your taxes, you have to do it before April 15. Hopefully you’ll be receiving a refund. We can all hope.

Once you file your taxes you still have one big decision left to make, what are you going to do with your tax refund?

There are 5 options of how to wisely reinvent your tax return.

Pay off credit card debt: Take this opportunity to pay off, or at least lower, your credit card debt. If you have student loans, vehicle payments or mortgage payments, you could put your return toward that as well.

Invest in your future: Financial planning, while not very exciting, is important. Meet with a financial adviser and see what types of investments are right for you. Perhaps it’s time to start a Roth IRA if you don’t already have one.

Invest in your children’s future: If you have children and hope they will go to college one day, setting up a college fund now can help offset tuition and other expenses down the road.

Buy a new vehicle: Have you been dreaming of a new car? Your tax refund might give you the additional income desired to put down a significant down payment.

Take a vacation: Everyone needs a little down time. Take some much needed time with your family, or just yourself and get away for a while. While you are vacationing, don’t forget to ask for a military discount at hotels, museums, attractions and restaurants. You can also book a vacation at a military resort if you want to stretch your tax refund dollars a little farther.

No matter how you choose to use your tax refund, do something that will make you happy. While your neighbor is showing off his new shiny car, you might be smiling having invested in your children’s 529 college savings program. It might not be flashy, but it will have a great reward one day when your children head off to college.