By: Ken Folberg, CPA.

For military members, there can be many opportunities to reduce your tax bill and increase your tax refund.  The challenge is knowing what you’re entitled to deduct or which credits you can get.  Here’s a brief summary of how to get back the most money.

1. Moving Expenses Members of the Armed Forces on active duty who move because of a permanent change of station can deduct your family’s reasonable unreimbursed expenses of moving.

2. Combat Pay Enlisted personnel and warrant officers’ military pay received for serving in a combat zone for any part of a month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.

3. Extension of Deadlines The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.

4. Uniform Cost and Upkeep If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your deduction by any allowance or reimbursement you receive.

5. Joint Returns Generally, joint returns must be signed by both spouses. However, when one spouse isn’t available due to military duty, a power of attorney may be used to file a joint return (see 10d below). 

6. Travel to Reserve Duty If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.

7. ROTC Students Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.  You normally file your tax return in your home state, and take a credit for any state income tax withheld from the states you trained in.

8. Transitioning Back to Civilian Life You may be able to deduct some costs you incur while looking for a new job. Expenses include travel, resume preparation fees and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain distance and other tests.

9. Homebuyers’ Credit Extended  Members of the uniformed services or Foreign Service and employees of the intelligence community who are on qualified official extended duty outside the United States may have an additional year to purchase a home and qualify for the credit.

10. Free Tax Assistance for Members of the Military 

1. Armed Forces Tax Council The Armed Forces Tax Council oversees the operation of the military tax programs worldwide, conducting outreach with the IRS to military personnel and their families. The AFTC consists of tax program coordinators for the Marine Corps, Air Force, Army, Navy and Coast Guard.
2. Volunteer Tax Sites  Volunteer assistors at Military-based VITA sites are trained to address military-specific tax issues, such as combat zone tax benefits and the new Earned Income Tax Credit guidelines.
3. What to Bring  Bring the following records to your military VITA site:

*  Valid photo identification

* Social Security cards for you, your spouse and dependents or a social security number verification letter issued by the Social Security Administration

*  Birth dates for you, your spouse and dependents

*  Current year’s tax package, if you received one

*  Wage and earning statement(s) — Form W-2, W-2G, 1099-R

*  Interest and dividend statements (Forms 1099)

*  A copy of last year’s federal and state tax returns, if available

*  Checkbook to get routing and account numbers for direct deposit

*  Total amount paid for day care and the day care provider’s identifying tax number

*  Other relevant information about income and expenses

1. Joint returns If your filing status is Married Filing Jointly and you wish to file your tax return electronically, both you and your spouse should be present to sign the required forms. If it isn’t possible for both of you to be present, a valid power of attorney that allows tax preparation (Form 2848) can be used to sign and file the return. There is a special exception to using a power of attorney for spouses in combat zones that permits the filing spouse to e-file a joint return with only a written statement setting forth that the other spouse is in a combat zone and is unable to sign.

11. Professional Tax Assistance for Members of the Military  Sometimes military members and their families have complexities in their situations such as:

*  Multiple states

*  Mutual fund or stock investments and trades

*  Education expenses

*  Home purchases

*  Divorces

*  Deaths

*  Parental support

*  Small businesses (or the desire to start a business), etc.

These situations exceed the actual ability of most part-time tax return preparers or VITA volunteers.  Fortunately, many CPAs near military bases offer truly professional tax advice and tax return preparation services for members of the military at substantial discounts. I also offer convenient, friendly, expert and deeply discounted, affordable services to members of the military, honorably discharged veterans and their families from every state.

12. More Information  Review IRS Publication 3, Armed Forces’ Tax Guide, available on the IRS Web site at http://www.irs.gov/pub/irs-pdf/p3.pdf or contact me at (262) 421-1170 or from my website http://www.MyNetCPA.com.

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About the author:  Ken Folberg     is a Certified Public Accountant and personally serves clients as head of a small accounting firm.  He has been licensed to practice since 1990 serving many individuals from throughout the U.S., including successfully representing clients before the IRS and state taxing authorities.

He also serves businesses ranging in size from home based businesses and sole proprietor trucking companies to Fortune 500 companies.

Ken holds a bachelor of science degree in Accounting from the University of Southern California (USC) and a masters degree from the University of Maryland. Since becoming a CPA, he has also completed over 1,000 hours of continuing professional education.

Ken is a 6-year honorably-discharged veteran of the U.S. Air Force, and is currently serving in a volunteer capacity as a captain with the U.S. Civil Air Patrol. He is also a 20-year member of the American Institute of Certified Public Accountants.

Contact Ken Folberg:

Tel: (262) 421-1170

www.MyNetCPA.com

Copyright^© 2010 KSF CPA Services LLC. All rights reserved.

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