When it comes to taxes, one of the most important things military members and spouses should remember is that there’s free, professional help available through the military. And as of today, free tax assistance has already begun.
The Internal Revenue Service will start accepting and processing tax returns on Jan. 27.
But you can start work now. As of today, you can download free tax preparation software, provided through the Defense Department’s Military OneSource MilTax program for service members and spouses. It’s also available to those who leave the service for one year after separation or retirement.
For the single service member with even the most basic tax return, that could mean a savings of around $150, which includes the estimated cost of the federal tax software as well as costs for state tax software. MilTax provides the software to file federal and up to three state tax returns for free. The savings rack up as the tax returns get more complicated. Each year about 200,000 military families file their taxes for free through MilTax.
Through the MilTax program, you can also get free tax help from tax consultants trained on the unique tax situations specific to service members and their families. One of the top reasons that service members and spouses come to these tax consultants is for help with multiple state tax returns, said Erika Slaton, associate director of outreach and engagement for DoD Military Community Support Programs. They’re available year-round, but as of today, there are extended hours, from 7 a.m. to 11 p.m. Eastern time.
At many military bases, there are free in-person tax preparation services at military Volunteer Income Tax Assistance locations, through the military legal assistance offices. Check with your nearest installation legal office to find out if and when the services will be offered. The volunteers who provide this service, primarily military members, must go through a rigorous certification process to earn tax-preparation certification from the Internal Revenue Service.
Take advantage of this free, expert help. “The last thing you want is to be down range and get a letter from the IRS that says you owe money,” said Army Lt. Col. Theodore Byrne, executive director of the Armed Forces Tax Council.
The first W-2s will be ready online by Jan. 7.
Byrne provides some tax reminders for service members and spouses.
* Are you one of the more than 400 military families who received money in 2019 under the new programs for reimbursement for the spouses’ professional re-licensing costs? That money is taxable, Byrne said. The service branches started implementing their reimbursement programs last May and June, for these costs resulting from relocation. One Navy spouse said the Navy has withheld 25 percent in federal taxes from the reimbursement. But unless there’s a law in the future that changes it, the reimbursement is counted as taxable income, Byrne said. Information was not immediately available from the Defense Finance and Accounting Service about whether service members who received the reimbursement will receive separate tax statements, or if it is included in their W2 forms.
*Many service members and spouses aren’t aware of a 2018 law allowing military spouses to choose the service member’s state of residence as their own, regardless of whether the non-military spouse had ever lived there. Byrne said he’s encountered a number of military members who aren’t aware of that change. Check the online information of the state where you’re stationed to determine what you need to do to inform the state of your chosen residence, such as updating the state income tax withholding information with your employer. You’ll need to be able to document why you’re a resident of one state rather than the state where you’re living, Byrne said.
Under the long-standing Servicemembers Civil Relief Act (SCRA), troops can maintain their legal residence as they are required to move around with the military, which allows them to vote and pay taxes in their state of legal residence, without having to pay taxes in two states. A significant number of troops claim their legal residence in states that have no state income taxes — Florida, Texas, Alaska, Nevada, South Dakota, Washington and Wyoming. Now, military spouses can claim a state based solely on their service member’s state of legal residence. If you make the change now, it’s effective in tax year 2020, going forward.
A provision in the fiscal 2020 National Defense Authorization Act expands these rights under the 2018 law by allowing spouses to use the same state of residence as their service member for any purpose, to include the registration of a business, regardless of the date of marriage. More and more spouses have started their own businesses, and are moving those businesses with them.
Before you make the decision about your state of residence, consult with the tax consultants at Military OneSource or the tax experts at the nearest installation legal office, Byrne said. This is a decision that must be well researched, on the part of the service member as well as the spouse, in looking at various consequences.
And if you own your own business, check with these tax experts to find out how this expansion of the law to include spouses who own businesses affects how you would file your taxes.
*Avoid common mistakes — such as entering the wrong Social Security number.
*Keep an eye out for tax statements various institutions may be sending you by email. With the barrage of electronic information we get, you might forget you asked your bank to send your tax statement with interest earned by email, Byrne said. The Internal Revenue Service gets that information too, and they’ll match it up.... and find you. It could cost you penalties and interest.
*Start gathering your tax documents now, and keep them in one place as you receive them. Slaton advises. Before you start the process of preparing your taxes, call Military OneSource and talk to a tax consultant about your needs, or check with the installation’s tax center.
*Deadline for filing is April 15. However, if you’re a member of the military serving in a combat zone or a contingency operation, you generally have at least 180 days after you leave that area to file and pay taxes. Again, your tax consultant and military legal experts are well versed in these situations and can provide more information.