Tax Filing Season 2009: What You Need To Know
By Jackie Perlman
Spring 2009
As a member of the military community, you should be aware of some special tax provisions designed to help soldiers and their families. Keep in mind these four points when filing your 2008 tax return.
1. Tax filing deadlines. Military personnel on a tour of duty outside the
Servicemembers serving in combat zones enjoy a special extension to file their returns, request refunds, pay any taxes due or meet other IRS obligations. These requirements are postponed during:
- the period of time served in a combat zone, plus
- the period of time – up to five years – of continuous hospitalization outside the U.S. due to injuries sustained while serving in a combat zone, plus
- 180 days
The 180-day postponement period runs consecutively with the regular tax filing period. In other words, if the special extension is granted due to serving in a combat zone, military personnel still can take advantage of the regular tax filing period.
The special extension for combat zone duty also applies to service in a qualified hazardous duty area or deployment in a contingency operation.
For all other military personnel, the deadline to file 2008 tax returns is the normal return due date of April 15, 2009. If the return cannot be completed by the due date, an automatic six-month extension to Oct. 15, 2009, may be requested by filing IRS Form 4868.
2. Signing the return. Military personnel are required to sign their own tax returns. But if the servicemember is out of the country, IRS Form 2848 may be completed to provide power of attorney for someone else to sign and file the return. If a joint return is being filed, the spouse may either send the return to the servicemember for signing or sign the return on their behalf. If the spouse signs on behalf of the servicemember, the spouse must have power of attorney.
There is an exception, though, for military personnel serving in a combat zone or who are incapacitated. The spouse may sign the return without power of attorney but must attach a statement to the return explaining why they are signing on behalf of the servicemember.
3. Recovery rebate credit. Military personnel may be eligible for a tax credit of up to $600 – $1,200 if filing a joint return – plus $300 for each qualifying child under age 17. In many cases, taxpayers are eligible for this credit even if they typically are not required to file a tax return, their only income is non-taxable combat pay, or the servicemember and spouse do not have active Social Security numbers but one of them is active-duty military.
Taxpayers who did not receive an economic stimulus rebate in 2008, or who are eligible for a higher rebate than they received, may claim a recovery rebate credit on their 2008 tax return. If the maximum rebate was received in 2008, there is no additional recovery credit available on the year’s tax return. And, for those taxpayers who received a higher-than-eligible rebate in 2008, the difference does not have to be repaid.
4. Retirement plan distributions. National Guard and Reserve members called to active duty are not required to pay the 10 percent early withdrawal penalty on any distribution received from an IRA or employer plan. The period of active duty must be at least 180 days or for an indefinite period, and the withdrawal must be taken while on active duty. Servicemembers should keep in mind that this distribution is taxable.
Military personnel can re-contribute the distribution within two years after their active duty ends, but there is no immediate tax benefit. It simply means that a portion of the retirement account withdrawals will be tax-free when the servicemember retires.
For more information about tax filing and the military, consult IRS Publication 3, The Armed Forces’ Tax Guide and IRS Publication 54, The Tax Guide for US Citizens and Resident Aliens Abroad.
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Jackie Perlman is an analyst for The Tax Institute at H&R Block and a Certified Public Accountant. H&R Block’s 13,000+ retail tax offices nationwide can assist servicemembers with any tax or financial concerns. Call 1-800-HRBLOCK or visit www.hrblock.com to find the nearest H&R Block location. Military families can learn more about making wise financial choices and find information about H&R Block’s Military Spouse Scholarship Program at www.hrblock.com/military.