I am a procrastinator. There, I said it. There are tasks that 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 — yes, even though there was nothing to do and nowhere to be in 2020.
In fact, 2020 has really just enabled my procrastination tendencies. What was once, “I really need to do laundry, so we have clothes for school/work/whatever,” is currently more like, “Ehh, I’ll just wear different sweatpants today since my favorite ones are dirty.” Need more proof? I loathe making the trip to the grocery store (especially if it’s the one thing stealing me away from my sweatpants for the day). 2020 did a lot of things wrong, but it is also the year that gave me grocery delivery. Now if I don’t feel like grocery shopping, I don’t have to.
Laundry and grocery shopping aren’t the only things I’m willing to procrastinate about. I’m also happy to push getting gas, vacuuming, making phone calls and filing taxes until the eleventh hour. Because, you know what, taxes are “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? Doubtful.
But, alas, taxes are certain and, unlike our generation’s first pandemic, they have a deadline. Now, procrastinators typically work well under the adrenaline rush of racing the clock, 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:
- Start with the W-2s. Military members’ and federal civilians’ 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.
- 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.
- 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.
- 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.
- 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 if you qualify, the IRS covers the rules and has a handy chart.
- 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. The MilTax prep and filing software can be accessed on MilitaryOneSource.mil. 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. They are trained in understanding complex tax situations specific to the military, like the ones I mentioned earlier. 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 be ready to break up with your sweatpants and venture out into the world again … just as soon as COVID-19 allows.