Tips for Filing Accurate Tax Returns

As tax season approaches, military families have extra things to keep in mind. Special tax circumstances apply to service members, and being familiar with the following four tax topics can help them file accurate tax returns and not overpay their taxes.

Know how different types of pay are taxed differently
Combat pay is not taxed, but that money can be included as earned income to qualify for the Earned Income Tax Credit and the Child Tax Credit. Among the types of income not included in gross income when calculating taxes are living, family, death and moving allowances.

Take tax breaks for relocations and everyday expenses
Following are some tax breaks service members may not know they could claim:

  • Military personnel who move due to a permanent change of duty may be eligible to deduct unreimbursed expenses necessary for the relocation of their household
    • Taxpayers don’t have to itemize their deductions to take this tax break
    • When the next move is back to civilian life, some job search expenses incurred may be tax-deductible as itemized deductions. These are one type of miscellaneous itemized deductions, which are only deductible to the extent they exceed 2 percent of adjusted gross income. 
    • The cost and upkeep of military uniforms also may be qualified itemized tax deductions in circumstances where they are prohibited by military regulation from wearing the uniforms when off duty.
    • Members of the reserves can deduct unreimbursed travel expenses if they travel more than 100 miles away from home to report for reserve duties.

Be aware of filing rules based on time in combat zones
Unless on a tour of duty outside the United States or Puerto Rico, or serving in a combat zone, military personnel must submit their tax returns by the April 15th deadline unless they apply for a six-month extension. To avoid late fees and interest, taxpayers must estimate their taxes owed and submit payment by April 15.

Those on a tour of duty outside the United States or Puerto Rico have an automatic two-month extension to file their returns, making their deadline June 15. Applying for an extension to file gives them an additional four months.

When serving in a combat zone, exceptions are made to when tax returns are due. The extension to file tax returns and even pay taxes due is 180 days after the later of these dates:

  • The last day served in the combat zone or the last day the area was designated as a combat zone
  • The last day of any continuous qualified hospitalization for an injury from service in a combat zone.

Understand state residency rules for spouses
Service members often retain residency status in their home states, despite frequent moves during active duty. The Military Spouse Residency Relief Act allows spouses to also retain residency status in their home state if they move with their military spouse. Under these rules, the spouse’s pay earned where they are stationed is not taxed there, but instead in the home state.

A civilian will not automatically be granted the same residency of their service member spouse. Instead, residency must be declared and the spouse must meet these three requirements to qualify for relief:

  • The spouse moves with the service member to the duty state in compliance with military orders
  • The spouse is living in the state solely to be with the service member
  • The spouse and service member share the same home state.

Misinterpretation of the residency relief act has likely resulted in many service members and their spouses paying state taxes they didn’t owe. If a service member thinks errors were made on past returns, amended state returns can generally be filed for the past three years, which includes tax years 2011, 2012 and 2013. The deadline for 2011 returns is generally April 15, 2015.

Many H&R Block tax professionals are specifically trained and educated to assist military families with preparing their tax returns; last year, H&R Block filed tax returns for more than 40 percent of active, reserve and retired service members. For more information about military-specific tax concerns, visit us at 1375 Madison Ave. in Bridgeport CT. 

Reynold Alabre is a Sr. Accountant and a Tax Advisor at H&R Block. He’s the Owner of the Rey Group, and a member of the BRBC in Bridgeport. Rey has been providing expert tax advice and preparation support for taxpayers for over a decade.

Rey Alabre’s contact info is listed below for more information.

Office Address: Bridgeport H&R Block 1375 Madison Ave. Bridgeport CT 06606

Office Phone Number: 203-908-3309