W2s will soon be hitting MyPay accounts around the world. Tax season is here, and we’ve got the 411 to help military families get the most bang for their buck.
Tax Season 411 for Military Troops & Families
Tax season can be stressful, especially for military troops and families. When you’re stationed far from your home of record or own several properties across multiple states, taxes can get interesting. Add in time in tax-free zones or small business ownership, and your military family’s taxes are super complicated.
However, knowledge is power. So we’re here to drop all our best intel and get you fully prepped for tax season 2020.
Know Your Deadlines
Tax season officially starts in late January, around January 27. W2s and other employer tax forms should arrive in the mail or be posted in your online pay portal by the end of the month.
Keep these handy for the whole process.
At the same time, you should also be getting tax forms from your bank, any investment accounts and other earnings.
Starting on or around January 27, you’ll be able to file your taxes with the IRS and your home of record. You will need to complete your filing or apply for a deadline by mid-April, usually on or around April 15.
Special Military-Specific Considerations
Did you know that BAH doesn’t count as “income” for tax purposes? That’s right: it’s exempt!
BAH and a whole host of other special military pay and benefits are not taxable. You can snag the whole list (from tax year 2018) from the IRS.
You can also claim deductions for uniform purchases, education and child care – although these are not all military-specific.
I’m Ready to File, Now What?
You have lots of options when filing, actually!
The military runs free tax centers on all major military installations, staffed by trained personnel. They can guide you through the process of filing state and local taxes. This is better for individuals and families with relatively uncomplicated taxes.
You could also file everything yourself, through the IRS or another online tax prep system like TurboTax. The IRS form is specifically for federal taxes. Each state also provides avenues to file without a preparation fee as well. Check with your specific state for more information.
MilitaryOneSource also offers free tax filing services for military troops through their MilTax software.
For more complicated taxes, like for property owners or small business owners, might require additional support from a tax professional.
You could opt for a larger accounting and tax prep firm. Turbo Tax and TaxSlayer all offer discounts and/or free tax support for military personnel. Each of these companies offers online tax filing support and assistance. Taxpayers will need to provide proof of military service along with all tax documents to qualify for the discount.
What If I Need Tons of Help?
Sometimes taxes are too much to muddle through even with online support or software. That’s when military troops and families can turn to local accountants, tax preparers and CPAs.
Many military spouses and veterans operate small businesses offering these services. Working with a military-connected accountant means that they’ll better understand the complications of your tax return because they probably have one that is just as challenging!
If a military-connected accountant isn’t available in your area, there are many large and small firms that can process your claims. Liberty Tax is a popular off-base company that offers a military discount. H&R Block is another popular tax company that has years of military expertise.
What Do I Need to Know in 2020?
Accountant Brandyn Cox, of BMC Accounting, shared some essential info that all military troops and families need to be tracking this tax season.
- Military personnel are the only group allowed to still claim moving expenses; the rules changed for everyone else in 2017
- You have until June 15 to file if you are deployed or stationed outside of the US and Puerto Rico
- Spouses can file on behalf of their deployed spouse, as long as IRS Form 2848 has bee submitted
Cox notes that it’s also important to check the most recent tax updates for tax year 2019. There have been some changes to automatic deductions and claims you can make this year.
Avoid This Major Military Pitfall!
In addition to these important points, Cox passed along advice that all military troops need to know.
“Common mistakes I have seen military members make nowadays revolve around taking distributions from their TSP,” he said. “When you take that money out of a Traditional TSP, you’re going to incur a penalty equal to 10% of that distribution.”
There might be additional taxes on that TSP withdrawal as well.
“You’ll also want to withhold income taxes for that as well,” explained Cox. “Depending on your rank, filing status and number of kids claimed you are usually going to want to withhold no less than 12%”
In other words, pulling money out from your TSP could cost you big in the long run.