Taxman comes later rather than sooner for those abroad
You could pretend the taxman won’t catch you thousands of miles away from home.
But there’s no escaping tax day, which is less than a week away. This year, April 15 falls on a Saturday, giving filers an extra two days until Monday, April 17 to file those tax forms.
Americans working abroad receive an automatic two-month filing extension. You don’t need to do or file anything special to get the extension, but make a note on your tax return when you do file later indicating that you were living and working abroad on April 17.
However, the interest clock still begins ticking April 17, so if you believe you will owe taxes, it’s better — cheaper — to file by the ordinary deadline. It might be just days away, but there are still many resources to help, online and on bases.
Nearly every base overseas features a Volunteer Income Tax Assistance program office where servicemembers and their families — and in most cases Defense Department civilians and retirees — can receive help with their taxes and file electronically for free.
The VITA offices are trained to help servicemembers with some of their special tax situations, such as how to file when a spouse earns money off base in a foreign country, or how to apply tax-free combat pay to a tax return in order to earn certain credits.
Besides VITA offices, a comprehensive source of information available anytime is the IRS Web site at: www.irs.gov. Most people can even file for free through the site, which lists links to companies providing free or low-cost tax preparation and filing.
Servicemembers can also use the services available at: www.militaryonesource.com.
One of the tax changes this year relevant to military families is the ability to claim non-taxed income received during combat tours to use toward two tax credits, according to military and IRS officials.
Families need some income to qualify for the earned income tax credit and the child tax credit. Servicemembers who earned tax-free income in a combat zone can check a box on their tax forms (it appears under the earned income credit section on the tax form) to have that income counted for the credits. The income will still not be taxed, according to the IRS and tax preparation officials. Those serving in combat zones also receive an automatic six-month extension on filing and tax payments (so no interest if you owe and pay late).
Civilians overseas have a few other special circumstances. Americans who are paid by non-U.S. government sources do not pay income tax up to about $80,000. The exception doesn’t apply to Defense Department civilians or nonappropriated fund employees.
So if the American spouse of a servicemember or government civilian earns money off base, the spouse won’t pay income tax on income up to $80,000. But they still must file a return, according to Judith Rickey, a VITA volunteer at Yokosuka Naval Base.
To qualify for the $80,000 exception, the filer must declare earnings and then file IRS Form 2555 to exclude those earnings.
Americans who earn money off base might still be required to pay Social Security and Medicaid taxes, Rickey added. If you pay Japanese taxes, you are considered an employee and don’t need to pay Social Security tax. However, if you’re not paying Japanese taxes, then you’re probably considered to be self-employed and would need to pay U.S. Social Security and Medicaid tax.
Non-American spouses have a slightly different situation. As a foreign citizen, a spouse doesn’t have to file a U.S. tax return. But, having a foreign spouse included in a return gives the family extra deductions and other benefits. As long as the spouse earns money from a non-U.S. government source, and earns less than $80,000, it pays to include him or her, Rickey said.
However, she notes that every situation is different, so families should visit a tax office to ask questions.
For those stationed on Guam, the rules are a little different: there is no automatic extension since Guam is a U.S. territory.
Guam residents also pay a tax to the territory, so a civilian who earns money off base may have to file a Guam-specific tax return. Visit a tax office this week to find out more.
Due to the automatic extension overseas, many base tax offices in Japan and South Korea will remain open through June 15.
In Guam, the offices close on April 15.
Where do I go?
What do I bring?
When visiting a VITA office, servicemembers should bring the following, according to the IRS:
Valid photo identificationSocial Security cards for you, your spouse and dependents or a Social Security number verification letter issued by the Social Security AdministrationBirth dates for you, your spouse and dependentsCurrent year’s tax package, if you received oneWage and earning statement(s) — Forms W-2, W-2G, 1099-RInterest and dividend statements (Forms 1099)A copy of last year’s federal and state tax returns, if availableBank routing numbers and account numbers for direct depositTotal amount paid for day careDay care provider’s identifying numberOther relevant information about income and expenses— Juliana Gittler