Available info on tax immunity for foreign survivors criticized
Her husband had just died of Alzheimer’s disease.
It was 1997, and Maria del Carmen Reimonde was alone.
Her Air Force retiree husband, however, had signed up — and paid for — the military’s Survivor Benefit Plan so that his wife would have an income if something ever happened to him. But Reimonde, who is Spanish and lives in Seville, soon found that she was receiving only 70 percent of her benefit because military accountants were deducting 30 percent as tax.
“I was living on $400 and something per month,” she said. “That was the 70 percent. Thank God I own my home.”
Only this year did she find the required form to keep the tax from being withheld. Before, she had to petition the IRS annually for a refund. As a Spanish citizen, she didn’t owe the United States any of it.
Spain and the United States have signed a treaty preventing taxation by both countries at once. But it took nearly a decade for the military to recognize it. And today, retirees complain that all such treaties are not listed on the military’s online Financial Management Regulation, despite years of vets’ efforts to get the agreements recognized. Retirees and survivors also complain that the Defense Finance and Accounting Service still deducts the taxes unless the proper forms are filled out — something many elderly foreign widows don’t understand.
“I think that’s not only illegal, but immoral as well,” said Reimonde, now 62. “They have to punish people because they choose to live in their own countries.”
After about eight years of complaints from Bill Thomas, a retired naval lieutenant commander, the military recognized the U.S. treaty with Spain.
Thomas felt relieved he could help others, but was mostly worried for the woman he met on Valentine’s Day 1953 at the U.S. Embassy in Madrid.
“I went through this to protect my wife,” said Thomas, who still lives in Spain. “That’s what got me started back in 1994. I saw what was going to happen to her.”
Later, in 2002, Wylie Miller, president of the U.S. Military Retiree Association of Southern Italy, took up the standard. Miller wanted another 19 nations listed by the IRS recognized by the military, too. In October, following his efforts and a story in Stars and Stripes, the DFAS director of finance, Jerry S. Hinton, issued a memo recognizing all the treaties.
The retirees were quiet and content. Then this April, just out of curiosity, Miller checked the list again as published online by the Defense Department comptroller. He found the 19 disputed nations were not on it, despite Hinton’s memo. Miller wrote another letter in complaint.
“It’s been two months and I still haven’t heard back,” Miller said.
It turns out the information online was just old, said Roger Still, a DFAS spokesman in Denver. But he wasn’t sure where else the changes were published in a form accessible to the public.
“It was implemented on Oct. 24, 2002, for all the additional countries,” Still said. “The fact it’s not listed on the FMR site does not mean it’s not listed. … The problem is it does take, in some instances, an inordinate amount time to update the military FMR on the Web.”
Traditionally, DFAS officials said they had added a nation to their list whenever surviving spouses from a particular treaty country complained.
Retirees say many elderly foreign widows simply go without the full benefit. The retirees want the onus to track treaties placed on the government, not the grandmas.
Sadly and ironically given the motivation behind his campaign, Thomas’ wife died of cancer last year. She was 73. He is now 74.
“That was the most fantastic person I ever met in my life — man or woman,” Thomas said, emotion welling in his voice.
“She went through it all — the Cold War, everything. … She battled cancer for about 4½ years, and cancer finally won.”
Tax-exempt foreign survivors
Foreigners whose American military spouses enrolled in the Survivor Benefit Plan do not have to pay U.S. taxes once their spouse dies, provided they live in their native countries, and that country has a tax treaty with the United States. Retirees complain that this information is difficult to obtain, and that the military’s online Financial Management Regulation doesn’t list all the affected countries. The regulation is viewable at: www.dod.mil/comptroller/fmr/07b/07B53.pdf
Nations recognized as having tax treaties but unlisted in the online comptroller regulation:
China, Lithuania, New Zealand, Estonia, Luxembourg, Switzerland, Sweden, Hungary, Mexico, Thailand, India, Portugal, Turkey, Ireland, Russia, Venezuela, Latvia, South Africa and Kazakhstan.
Countries already listed as having signed tax treaties with the United States:
Australia, Belgium, Cyprus, Egypt, Finland, France, Germany, Iceland, Italy, Korea, Morocco, Netherlands, Norway, Pakistan, Romania, Spain, Trinidad and Tobago, and the United Kingdom.
Surviving spouses in these countries can stop withholdings but must file IRS form W-8BEN to do so. The form should be sent to:
Defense Finance and Accounting ServiceUS Military Annuitant PayP.O. Box 7131London, KY 40742-7131USA