While combat pay generally is nontaxable, servicemembers are permitted to count this pay on their 2007 or 2008 income tax returns if it helps their eligibility, Clay Sanford explained.
"A military person who would not normally file a 2007 tax return because the 2007 income is not taxable, can file a 1040A with the IRS and receive the stimulus payment," he said. Servicemembers should report their nontaxable combat pay on Line 40b of the Form 1040A to show at least $3,000 in qualifying income, he added.
Starting in May, as part of the economic stimulus plan, the IRS will issue payments of up to $600 -- $1,200 for married couples -- plus a $300 payment for each qualifying child younger than 17. The payments are based on 2007 income tax returns. The payments for individuals begin to phase out starting at $75,000 in adjusted gross income for single taxpayers, and at $150,000 for married couples.
People must have at least $3,000 in qualifying income to get a payment. Qualifying income is defined as any combination of earned income (such as wages or taxable income from self-employment), nontaxable combat pay and certain benefits from Social Security, Veterans Affairs and Railroad Retirement.
Sanford encouraged qualifying servicemembers to submit early. While military servicemembers who are serving in a combat zone are granted an extension of 180 days after leaving combat, spouses or others with a power of attorney can prepare and file a 2007 income tax return on their behalf so that the stimulus payment is received this year. The return must be filed by Oct. 15.
Sanford offered additional tax advice to servicemembers during the interview, especially those who are just starting out and filing taxes for the first time.
"Keep receipts and copies of your tax returns," he cautioned. It's a good idea to keep receipts for six years and the tax returns indefinitely, he advised.
"You are responsible for your own tax return, regardless of whether you do it yourself or rely on a tax preparer," he said.
For help, Sanford listed a number of helpful documents that can provide clarification. By going to the IRS Web site at www.irs.gov and typing in "Publication 3," he explained, servicemembers will find a great resource for active duty people and reservists. He also recommended Publication 17 for learning more about general filing of individual income tax, and Publication 525, aimed at veterans and those with pensions. He also noted that many military members qualify for free electronic tax filing.
"Additionally, on most military installations, the legal office is there to provide you with information," he said, and he also noted that the military is one of the IRS's leading partners in its Volunteer Income Tax Assistance program, in which provides on-site help to taxpayers, courtesy of volunteers in their organizations.
In today's digital age, irs.gov is a great resource for young servicemembers, Sanford went on to say. Sanford encouraged servicemembers to visit the site for detailed educational guides on filing, helpful tips and tools, and to learn more about the special deductions that may not be intuitive for military members.
Those without easy access to the Internet can call 1-800-TAX-1040 toll free for information and answers to any specific questions, he said.
Findlater works in the New Media branch at American Forces Information Service.