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Military Tax Filing: It’s a Whole Thing

Show of hands, who puts off a task because you just know it isn’t as simple as it should be? There are tasks that honestly carry over on my to-do list for weeks because I know they’re going to be “a whole thing,” and rarely do I have time for whole things.

Need an example? There’s not one, but two laundry baskets full of clean, folded clothes sitting in our upstairs hallway. Instead of just putting the clothes away, I keep pulling what I need from the basket when I need it and adding freshly folded items as they exit the dryer. Why, you ask? The answer is simple: The task is not just putting laundry away. It’s straightening drawers and closets that have been neglected while adjusting to the new school year, rolled into the chaos of the holiday season. It’s tiptoeing through the tight square footage of our overseas base housing to find hangers and room for the neglected clothes in the hallway. It’s also not having enough consecutive minutes to dedicate to this process. So, because I know it’s going to demand an entire free Saturday, it slides one week to the next on my to-do list.

Need another example? Taxes. That may not be a complete sentence, but it is definitely “a whole thing.” I mean, we are only required to file them once a year. Anything else classified as “annual” requires refresher training (whether formal or YouTube in nature). But we’re supposed to just remember all the ins and outs of tax filing from the year before? Oh no, friends. That sounds like something that is going to be a recurring act on our to-do lists.

Unlike our laundry baskets, though, our taxes have deadlines. I know it’s tempting to tell yourself, “OK, self, we have until April to gather the W-2s and figure out the answers to all our complex questions to make the deadline.” I work best under pressure; I get it. But, the longer those taxes hang out on our to-do lists, the more intimidating they become. If we can get some common questions addressed right here, maybe we can tackle those taxes sooner rather than later this year.

Here’s my tried-and-true way to tackle military taxes:

  1. Start with the W-2s. Military members’ W-2s are accessible on MyPay. For my fellow military spouses, if your service member is away while you’re filing, you’ll need a power of attorney to submit.
  2. Decode all the pays. Out in the civilian workforce, it’s simple: “Thanks for clocking in; here’s your salary.” In the military, though, it’s more like, “Here’s your base pay, and your housing allowance, and some combat pay if you earned that, and — ooh, you live overseas — here’s an allowance for that, and some incentive pay, and re-enlistment bonus, and — ooh again, we see it’s really expensive at your duty station — here’s some COLA.” The short version is: pay excluded from gross pay is not taxable. Generally, these exclusions are allowances for living, moving, travel and death, as well as combat zone pay.
  3. Clarify moving expenses. Can you deduct your entire move? No. Can you deduct expenses that were NOT covered or reimbursed? Yes, if the move is on PCS orders and not just a move across town because you needed a bigger house or better commute.
  4. Face the residency dilemma head-on. Residency doesn’t matter for federal income tax, but it’s basically the only thing that matters for filing state income tax. You file state income tax in your state of residence, even if you don’t currently live in your state of residence. Just so everyone is tracking, Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming do not have income tax. And just for the sake of confusing everyone in New Hampshire and Tennessee, these states don’t tax earned income (your W-2) but tax dividends and interest.
  5. Don’t forget about the Earned Income Tax Credit. Some military families may qualify for EITC. It’s based on your income and the number of children you have. If you are curious about whether or not you qualify, the IRS covers the rules and has a handy chart.
  6. Get help filing. Something really cool about the military community is that we have free tax help. You can access one of the biggest resources, MilTax. Military OneSource MilTax is the only tax preparation and filing software provided by the Department of Defense designed exclusively for the military community. MilTax can be accessed through a link found on the Military OneSource MilTax page. You can also access MilTax at a VITA location. Not sure if you’re clicking the right box or using the right numbers?  MilTax consultants are available to answer questions year-round.  These are the folks who can answer those questions, however big or small. Avoid paying for a service when you qualify for a free version of the same thing.

Tax filing is a whole thing, I get it. But it honestly doesn’t have to be for military families. Collect your documents, use your free resources, and tackle taxes early this year. As soon as your taxes are done, you’ll finally be able to get that laundry put away…next week.

Kristi Stolzenberg
Written By Kristi Stolzenberg
Marine Spouse

Kristi started writing for Blog Brigade as a new Milspouse in 2008, and all of a sudden, she’s a seasoned (but not overly salty) Marine spouse.

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