For US Forces Serving In Combat Zones

As the war in Iraq and Afgahnistan continues, for many of the service men and women of this country and their spouses, filing tax returns is often the last thing on their minds. Unfortunately, this is something that still needs to be considered. Fortunately, the Internal Revenue Service has provided filing extensions, benefits and tax relief to those who qualify.

I have tried to round up pertinent information regarding benefits and other information for the U.S. Military currently serving abroad and have posted it here.

First and foremost, you are going to need IRS Publication 3. This is the IRS publication dealing with income tax filings for the military. You can download a copy in Adobe's .pdf format by CLICKING HERE. You must have Free Acrobat reader installed. Most computers already have this. If yours doesn't, just click here and go to Adobe's web site to obtain your free copy.

November 15, 2003. The President has signed the Military Family Tax Relief Act On November 11, 2003. It mostly provides tax relief to those serving in the U.S. military. For those selling their principal residence, it provides an election to suspend for up to 10 years the running of the five-year period for testing ownership and use while the taxpayer (or spouse) is on qualified official extended duty in the U.S. Armed Services or Foreign Service. Among other things, the new law also provides a full exclusion from federal income tax of Death Gratuity Payments, excludes from income tax certain Homeowner Assistance Program payments from the Department of Defense and provides an above the line deduction for the overnight travel expenses of reservists. The Internal Revenue Service is helping military taxpayers and their families use a new law providing income exclusions for death benefit payments and certain home sales. Both provisions are retroactive, so some qualifying taxpayers must file amended returns to claim these tax breaks. The IRS asks them to put the words "Military Family Tax Relief Act" in red at the top of such returns to speed processing. The new law doubled the benefit paid to survivors of deceased Armed Forces members to $12,000, made the entire amount tax-free and made the changes effective for deaths occurring after Sept. 10, 2001. Also in the law, taxpayers may exclude gain on a home sale, provided they have owned and used the home as a principal residence for two of the five years before the sale. A reduced maximum exclusion may apply to those who satisfy part of the two-year rule. This change applies to home sales after May 6, 1997. Although an amended return must usually be filed within three years of the original return's due date, the law gives qualifying taxpayers who sold a home before 2001 until Nov. 10, 2004, to file an amended return claiming the exclusion. For additional details on this Tax Act see "Tax Information for Members of the U.S. Armed Forces". The new law also suspends the tax exempt status of terrorist organizations. The IRS has issued guidance, Announcement 2003-74, on suspending the exempt status of three organizations identified with terrorism. For complete details, download the Adobe .pdf file from the IRS web site by clicking here, then click on your back button to return to this page.

Notifying the IRS by E-Mail about Combat Zone Service

Working with the Department of Defense, the Internal Revenue Service identifies taxpayers who are serving in a combat zone so that the IRS may suspend compliance actions, such as audits or enforced collections, until 180 days after the taxpayer has left the zone. Taxpayers qualifying for such combat zone relief may also notify the IRS directly of their status through a special e-mail address: combatzone@irs.gov. You should ONLY provide name, stateside address, date of birth and date of deployment to the combat zone. You should NOT include any social security numbers in an e-mail. This notification may be made by the taxpayer, spouse, or authorized agent or representative.

The IRS cannot provide tax account information by e-mail. Therefore, they will send responses to any questions about the taxpayer’s account by regular mail to the address they have on record for the person, within two business days. The IRS may provide general answers to questions regarding the status of individual combat zone updates via e-mail.

SOCIAL SECURITY ANNOUNCEMENT: BENEFITS FOR FAMILIES OF TROOPS IN COMBAT PROTECTED: Military families will not lose valuable government disability benefits because a household member has been sent into combat. Jo Anne B. Barnhart, Commissioner of Social Security, has made it clear that people who get Supplemental Security Income (SSI) disability payments and Medicaid coverage can continue to do so even if family income rises due to a mother, father or spouse getting special combat-related supplements to their military pay. You can find additional information at the Social Security Administration's Web Site.

Here are some other IRS Releases and documents, which explain how your filing deadlines are affected by your heroic service to your country.

For the most frequently asked questions concerning active duty military filing deadlines, extensions and what if any of military income is exempt from taxation while in a combat zone.

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