Question 1

Recordkeeping: What records do I need to keep for tax preparation purposes and how do I need to keep them?

Accepted Answer

According to the IRS, you must keep records such as receipts, canceled checks, and other documents (W-2s, 1099s, invoices, etc.) that support either an item of income, a deduction, or a credit appearing on a tax return for as long as those records may become material in the administration of any provision of the Internal Revenue Code. In short, you are required to keep all records that support anything reflected on your tax return for at least 3 years. Taxpayers should also remember to keep copies of their previously filed tax returns, including any amended returns, to assist in preparing future returns.   For more information, see MyTaxRights's Recordkeeping Best Practices as well as IRS Topic No. 305 (Recordkeeping).

Question 2

Mistakes: What should I do if I made a mistake on my federal income tax return that I already filed?

Accepted Answer

It depends on the type of mistake you made. Many mathematical errors are caught during the processing of the tax return and corrected by the IRS, so you may not need to correct these mistakes. If you did not claim the correct filing status or you need to change your income, deductions, or credits, you should file an amended or corrected return using Form 1040X (Amended U.S. Individual Income Tax Return). When filing an amended or corrected return: Include copies of any forms and/or schedules that you're changing or didn't include with your original return. To avoid delays, file Form 1040X only after you've filed your original return. Generally, for a credit or refund, you must file Form 1040X within 3 years after the date you timely filed your original return or within 2 years after the date you paid the tax, whichever is later. Allow the IRS up to 16 weeks to process the amended return. Check out the following resources for additional information: IRS Tax Topic 308 (Amended Returns) Should I File an Amended Return? Instructions for Form 1040-X (Amended U.S. Individual Income Tax Return)

Question 3

Change of Address (PCS): My mailing address changed, do I need to notify the IRS?

Accepted Answer

Yes.   If you change your mailing address, be sure to notify the IRS as soon as possible by submitting a Form 8822 (Change of Address). Mail it to the appropriate IRS Service Center based on the location of your old address. The addresses for the IRS Service Centers are listed on the back of the Form 8822.   Business Address Change If you are changing a business address, notify the IRS by submitting a Form 8822-B (Change of Address or Responsible Party—Business).

Question 4

Military Pay: What types of military pay do I need to include as income on my tax return?

Accepted Answer

According to the IRS, the following types of pay should be included as part of your gross income and reported on your tax return:   Basic pay for: Active duty Attendance at a designated service school Back wages Cadet/midshipman pay Drills Reserve training Training duty Special pay for:    Aviation career incentives Career sea Diving duty Foreign duty (outside the 48 contiguous states and the District of Columbia) Foreign language proficiency Hardship duty Hostile fire or imminent danger Medical and dental officers Nuclear-qualified officers Optometry Other Health Professional Special Pays (for example, nurse, physician assistant, social work, etc.) Pharmacy Special compensation for assistance with activities of daily living (SCAADL) Special duty assignment pay Veterinarian Voluntary Separation Incentive Bonus pay for: Career status Continuation pay Enlistment Officer Overseas extension Reenlistment Incentive pay for: Submarine Flight Hazardous duty High Altitude/Low Opening (HALO) Other pay for: Accrued leave CONUS COLA High deployment per diem Personal money allowances paid to high-ranking officers Student loan repayment from programs such as the Department of Defense Educational Loan Repayment Program when year's service (requirement) is not attributable to a combat zone Non-taxble Military Pay For pay that is not subject to federal tax (which means you do not have to report the income on your tax return), review the FAQ titled "What types of military pay can I exclude from reporting as gross income on my tax return?" See also IRS Publication 3, Table 2.

Question 5

Non-Taxable Income: What types of military pay can I exclude from income?

Accepted Answer

According to the IRS, you may exclude the following types of military pay from gross income on your tax return.   Combat pay for: Compensation for active service while in a combat zone (See Combat Pay Exclusion , later) Note. The exclusion for certain officers is limited. See Commissioned officers (other than commissioned warrant officers). Other pay for: Certain amounts received under the Armed Forces Health Professions Scholarship and Financial Assistance Program payments Certain disability retirement pay, including payments received for injuries incurred as a direct result of a terrorist or military action Disability severance payments (See Disability Severance Payments to Veterans , later) Group-term life insurance Professional education ROTC educational and subsistence allowances State bonus pay for service in a combat zone (See State bonus payments , later) Survivor and retirement protection plan premiums Uniform allowances Death allowances for:   Burial services Death gratuity payments to eligible survivors Travel of dependents to burial site Family allowances for:   Certain educational expenses for dependents Emergencies Evacuation to a place of safety Separation Living allowances for: BAH (Basic Allowance for Housing) (See also Can I deduct expenses paid with my excluded basic allowance for housing (BAH) , later) BAS (Basic Allowance for Subsistence) Housing and cost-of-living allowances abroad paid by the U.S. Government or by a foreign government OHA (Overseas Housing Allowance) Moving allowances for:    Dislocation Military base realignment and closure benefit (See Military base realignment and closure benefits , later) Move-in housing Moving household and personal items Moving trailers or mobile homes Storage Temporary lodging and temporary lodging expenses Travel allowances for:     Annual round trip for dependent students Leave between consecutive overseas tours Reassignment in a dependent restricted status Transportation for you or your dependents during ship overhaul or inactivation Per diem In-kind military benefits for:  Dependent-care assistance program Defense counsel services Legal assistance Medical/dental care Commissary/exchange discounts Space-available travel on government aircraft Uniforms furnished to enlisted personnel   For more information, see IRS Publication 3, Table 2.

Question 6

Tax Residence: Can I claim my spouse's state of residence on my tax return if he or she resides in a different location than I do?

Accepted Answer

Yes. Beginning in 2018, if you are the civilian spouse of an active duty servicemember, you may elect to have the same tax residence as the servicemember.

Question 7

TSP Withdrawals: Do I need to pay taxes on the money I withdrew from my Thift Savings Plan (TSP)?

Accepted Answer

Generally yes. If you receive a distribution from your Thift Saviings Plan account, then you are generally required to include the amount as part of your taxable income on your tax return.    Exception: If your TSP contributions included tax-exempt combat pay, then part of the distribution attributable to those contributions is tax exempt. However, any earnings on the tax-exempt portion of the distribution is still taxable.   Do not struggle in trying to determine what portion is taxable vs. nontaxable, your TSP administrator will provide you with a statement showing the taxable and nontaxable portions of the distribution.   For more information on TSP distributions, see TSP-536 (Important Tax Information About Payments From Your TSP Account).

Question 8

Disability Severance Pay: Do I need to pay taxes on my disability severance pay?

Accepted Answer

No. Veterans discharged from military service due to medical disability may receive a one-time lump sum severance payment that is not subject to federal income tax if either of the following two scenarios apply: The veteran has a combat related injury or illness as determined by the veteran's military service at separation that: Resulted directly from armed conflict; or Took place while the veteran was engaged in extra-hazardous service; or Took place under conditions simulating war, including training exercises such as maneuvers; or Was caused by an instrumentality of war. The veteran is receiving VA disability compensation or has received notification from the VA approving such compensation. Filing for a Tax Refund If you received a disability severance payment that was taxed to you, and either: (a) the amounts received were by reason of a combat-related injury; or (b) the Department of Veterans Affairs later determined that you were entitled to receive disability compensation, your severance payment is not subject to tax and you can file a claim for credit or refund using Form 1040X for the tax year you received the disability severance payment. For more information about amending prior year returns to take advantage of this change, see the Instructions for Form 1040X.

Question 9

Funds Received for PCS: Do I need to report the reimbursement funds I received for moving?

Accepted Answer

No, unless the total amount of reimbursement exceeds the amount of actual expenses incurred.    Generally, if your total reimbursements or allowances for a PCS exceed your actual moving expenses, then the excess amount is included as part of your gross income and should be reflected in the wages column on your Form W-2. However, if any reimbursements or allowances (other than dislocation allowances, temporary lodging expenses, temporary lodging allowances, or move-in housing allowances) exceed the cost of moving and the excess is not included in your wages on Form W-2, the excess amount still must be included as part of your gross income and reported on your Form 1040.

Question 10

Reservists Defined: Who is considered a member of a Reserve Component for tax purposes?

Accepted Answer

You are a member of a reserve component of the Armed Forces for tax purposes if you are in the: Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve; Army National Guard of the United States; Air National Guard of the United States; or Ready Reserve Corps of the Public Health Service.

Question 11

Travel Expenses: As a reservist, can I deduct my travel expenses connected with attending training or drill?"

Accepted Answer

Yes, but only if you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves. If this is the case, you may deduct your unreimbursed travel expenses on your tax return. Be sure to include all unreimbursed expenses from the time you leave home up until the time you return home.   You can calculcate your deduction amount by completing a Form 2106 (Employee Business Expenses). You will find the total deduction amount on line 10 of the Form 2106, which will ultimately be reported on line 21 of your federal income tax return (Schedule 1, Form 1040).

Question 12

IRS Distributions: As a reservist, are distributions from my Indiviudal Retirement Account (IRA) subject to the 10% early withdrawal penalty?"

Accepted Answer

It depends. A qualified reservist distribution is not subject to the 10% additional tax on early distributions from certain retirement plans, but only if ALL of the following requirements are met: You were ordered or called to active duty after September 11, 2001; You were ordered or called to active duty for a period of more than 179 days or for an indefinite period because you are a member of a reserve component; The distribution is from an IRA or from amounts attributable to elective deferrals under a section 401(k) or 403(b) plan or a similar arrangement; and The distribution was made no earlier than the date of the order or call to active duty and no later than the close of the active duty period.

Question 13

What is a tax credit?

Accepted Answer

A tax credit reduces the amount of taxes you owe dollar-for-dollar. For example, if you owe $1,000 in taxes but claim a $1,000 tax credit, then your tax liability becomes $0.    There are two types of credits: refundable and non-refundable. A refundable credit reduces your tax liability dallar-for-dollar and can result in a refund if your liability falls below zero. A nonrefundable credit still reduces your tax liability dollar-for-dollar but only to a minimum of $0, it cannot produce a refund.

Question 14

Education Credits: Are there tax credits available to offset the costs of attending college?

Accepted Answer

Yes.   Whether online, in-person, part-time, or full-time, higher education can be expensive. An education credit is a type of tax credit that helps subsidize the cost of higher education by reducing the amount of tax owed on your tax return. There are two types of education credits: the American Opportunity Tax Credit and the Lifetime Learning Credit.   The American Opportunity Tax Credit (AOTC) Worth a maximum benefit of up to $2,500 per eligible student; Only for the first four years at an eligible college or vocational school; For students pursuing a degree or other recognized education credential; and Partially refundable (up to $1,000 of the credit is refundable). Note, you cannot claim the AOTC if, as a single filer, your modified adjusted gross income (AGI) is greater than $90,000 ($180,000 if married filing jointly).   The Lifetime Learning Credit (LLC) Worth a maximum benefit of up to $2,000 per tax return, per year, no matter how many students qualify; Available for all years of post-secondary education and for courses to acquire or improve job skills; Available for an unlimited number of tax years; This is a non-refundable credit (which means it can only help reduce your tax liability). Note, you cannot claim the LLC if, as a single filer, your modified adjusted gross income (AGI) is greater than $68,000 ($136,000 if married filing jointly).   General Eligibility To be eligible, either the taxpayer, spouse, or dependent needs to: Be enrolled in an eligible educational institution (i.e., a school offering higher education beyond high school); and Have paid qualified education expenses for higher education and received IRS Form 1098-T (Tuition Statement) from the eligible educational institution. However, there are exceptions if a student has not received IRS Form 1098-T (see the answers to questions 18,19 and 20 on the IRS's Education Credits: Questions and Answers). Note, you cannot claim either of these tax credits if someone else (e.g., your parents) claims you as a dependent on their tax return. You also cannot claim either credit if your filing status is married filing separately.   Quick Eligibility Check Taxpayers can use the IRS's Interactive Tax Assistant tool to figure out if they are eligible for either of these two tax credits.

Question 15

Extensions for Overseas Deployment: If I am serving overseas, do I have more time to file and pay my taxes?"

Accepted Answer

Yes. Members of the U.S. Armed Services deployed overseas are entitled to an automatic two-month extension (i.e., until June 15th) to file and pay their federal income taxes. You are not required to file any paperwork to receive the extension. Servicemembers deployed to a combat zone are entitled to much longer extension (see below).   Serving in a Combat Zone Members of the U.S. Armed Forces who serve in a combat zone are entitled to an automatic extension of time to file and pay their taxes (in addition to an extension of other tax deadlines). The extension lasts for the period of service in the combat zone, plus 180 days after the servicemember's last day in the combat zone.   Serving outside a Combat Zone Members of the U.S. Armed Forces who perform military service in an area outside a combat zone qualify for the suspension of time provisions if: (1) their service is in direct support of military operations in the combat zone; and (2) they receive special pay for duty subject to hostile fire or imminent danger as certified by the Department of Defense   Other Individuals Serving in Combat Zone Note, the deadline extensions also apply to individuals serving in the combat zone in support of the U.S. Armed Forces, such as merchant marines serving aboard vessels under the operational control of the Department of Defense, Red Cross personnel, and civilian personnel acting under the direction of the U.S. Armed Forces in support of those forces.   For more information, see the IRS's Extension of Deadlines --- Combat Zone Service page.

Question 16

Deployment Pay: Is military pay I receive while depolyed to a combat zone subject to federal income tax?

Accepted Answer

According to the IRS, compensation received while deployed to a combat zone or qualified hazard duty area is not subject to federal income tax if you are either an enlisted member, a warrant officer, or a commissioned warrant officer. There are special exclusion rules for commissioned officers (other than commissioned warrant officers). Enlisted | Warrant Officers | Commissioned Warrant Officers If you are an enlisted member, warrant officer, or commissioned warrant officer, you can exclude the following amounts from your income: Active duty pay earned in any month you served in a combat zone. Imminent danger/hostile fire pay. A reenlistment bonus if the voluntary extension or reenlistment occurs in a month you served in a combat zone. Pay for accrued leave earned in any month you served in a combat zone. The DoD must determine that the unused leave was earned during that period. Pay received for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other nonappropriated fund activities. The pay must be earned in a month you served in a combat zone. Awards for suggestions, inventions, or scientific achievements you are entitled to because of a submission you made in a month you served in a combat zone. Student loan repayments. If the entire year of service required to earn the repayment was performed in a combat zone, the entire repayment made because of that year of service is excluded. If only part of that year of service was performed in a combat zone, only part of the repayment qualifies for exclusion. For example, if you served in a combat zone for 5 months, 5/12 of your repayment qualifies for exclusion. Commissioned Officers If you are a commissioned officer (other than a commissioned warrant officer), there is a limit to the amount of combat pay you can exclude. The amount of your exclusion is limited to the highest rate of enlisted pay (plus imminent danger/hostile fire pay you received) for each month during any part of which you served in a combat zone or were hospitalized as a result of your service there. For 2018, the exclusion amount was $8,586.00 per month (i.e., $8,361.00 for the highest enlisted pay, plus $225 for imminent danger pay).

Servicemembers: Tax Info & FAQs

Find answers to common tax questions unique to military service, and learn about the free tax services available to those who serve.

Free Tax Preparation Options for Servicemembers

Department of Defense's MilTax Service

Access MilTax using the following link:

Volunteer Income Tax Assistance (VITA) Program

Military members, including retirees, are eligible to receive free tax consultation and preparation through VITA locations. VITA specialists are trained to address military-specific tax issues like combat-zone benefits and applying Earned Income Credit guidelines.

Find your nearest VITA site using the following link:

Free File Program