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Tax tips: Make sure you know the new rules

Jan. 26, 2013 - 09:53AM   |   Last Updated: Jan. 26, 2013 - 09:53AM  |  
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WHERE TO GET FREE HELP

• Military tax centers, run by the legal assistance office on base. Check ahead to find out about possible limitations on whom they’re serving because of staffing issues. They may be helping troops with simple returns or limiting their help to junior troops. Others may be helping retirees and people with more complex returns.
• Militaryonesource.mil, for a free online tax preparation service offered to active-duty, Guard and reserve members, and their families. The service, through a partnership with H&R Block, is free for the basic package. Military OneSource also provides tax consultants to answer questions. The toll-free number is 800-342-9647.
• TurboTax Military Edition is free for troops in paygrades E-1 to E-5 through Feb. 14 and is offered at a discount for higher-ranking personnel.

Before you start preparing your taxes, we have some tips and reminders from Army Lt. Col. Evan Stone, director of the Armed Forces Tax Council.

For early filers, the Internal Revenue Service announced it would not begin processing individual income tax returns until Jan. 30, regardless of whether you file electronic returns or paper returns, because of adjustments being made due to tax law changes enacted Jan. 2.

Although the IRS anticipated that most taxpayers could start filing by that day, several forms are affected by the tax law that require more extensive programming by the IRS, so some taxpayers may not be able to file until late February or March.

Two such forms are Form 5695 (Residential Energy Credits) and Form 4562 (Depreciation and Amortization). A full list is available at www.irs.gov.

Stone reminds military families that the new tax law resurrected certain deductions that can affect them, including:

Deduction for state and local sales tax

Normal federal tax returns allow the deduction of income tax paid to a state. But if your state doesn't have an income tax, you can use a formula and chart to deduct state and local sales tax. "This is important for [service members] because they often come from states that don't have income tax," such as Texas, Florida and Alaska, Stone said.

Deduction for teachers' classroom expenses

This applies to all teachers, but Stone notes that many military spouses are teachers. The law allows deductions of up to $250 for classroom expenses if the teacher spent money out of his or her own pocket. The deduction can be used either on standard or itemized returns, and is considered an "above-the-line deduction" from gross income, Stone noted.

Troops and spouses need to remember some other long-standing tax benefits:

Combat-zone exclusion

Certain pay is excluded from taxes in the month in which you either served in a combat zone or were hospitalized as a result of wounds, disease or injury while serving in the zone. If you served for any part of one or more days, you are entitled to the exclusion for the entire month. The cap is the highest level of monthly enlisted pay, meaning only senior officers O-6 and above pay any federal taxes on income earned in a combat zone.

Tax deadline extensions

The deadline for filing taxes is April 15. But if you're deployed to a combat zone, your deadline is extended 180 days from either the last day you were in the combat zone or the last day of any continuous hospitalization for injury from service in the combat zone. No interest or penalties apply.

An additional extension tacks on the number of days that were left for you to file taxes when you entered the combat zone. For example, if you enter the combat zone March 15, you'd have an additional month added to the normal 180-day extension.

Troops serving overseas but not in a combat zone have an automatic two-month extension, until June 15, to file and pay. Interest, but no penalties, would be owed on the taxes.

Document checklist

Stone said the most common tax mistake service members make is putting the wrong Social Security number on the forms. If you go to a military tax center or another tax preparer to have your taxes done, take your Social Security card.

Other documents you should take (and these are just basics — everyone's situation is different):

• Your military ID card.

• W-2 forms from employers.

• Previous year's tax return, to give the tax preparer an idea of what documents to ask for.

• Evidence of expenses such as child care. You'll need the child care provider's tax identification or Social Security number.

• If you expect a refund, take your bank routing number, found at the bottom of your checks.

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