This year, more servicemembers are eligible for earned income tax credit
Fired up from the Super Bowl? Well, get ready for that other highlight of the season: tax time.
Aye, the taxman cometh, and he brings no half-time entertainment.
Tax centers are opening next week across Europe. But experts find many troops actually fill out returns with much more relish than the pin-striped brokers back home.
Troops traditionally look forward to the whole thing because many come away with refunds. And this year, nontaxable income doesn’t count against eligibility for the earned income tax credit. That means housing allowances or pay earned in combat zones won’t be factors.
“A much broader selection of soldiers are eligible for the earned income tax credit,” said John Martensen, chief legal assistant for U.S. Army Europe. That means even oft-deployed senior enlisted troops or officers can qualify for the tax break, originally designed as an incentive to work for low-income families.
“Who are we to question?” Martensen said. “It was certainly cut in the soldier’s favor.”
The returns can be hefty. “For young soldiers, their average refund is something like $2,000...for them, that’s something exciting.”
Another tax change comes from the Defense Finance and Accounting Service. According to spokesman Bryan Hubbard, troops and civilians who work for the military can view, save and print their W-2 forms via the Internet.
“With impending deployments for many of our folks, I know lots of folks have been waiting for this,” Hubbard said in his announcement of the service.
The agency is also trying to recruit troops to voluntarily stop their printed W-2 forms to save on paper and expenses. For more information, try: www.dfas.mil/mypay/.
Most tax centers will get into full swing next week. Martensen said that between them, the Army and Air Force processed about 47,000 returns from Europe last year.
Many troops choose the centers’ electronic filing option because filers can see their returns three weeks faster. At Ramstein Air Base, 3,372 of 4,542 of the returns prepared there were filed electronically, said Capt. Mark Etheridge, chief of administrative law there.
The centers can also provide taxpayers with computer-generated hard copies of their returns if they prefer filing the old-fashioned way.
“They get a printed copy of the return,” Martensen said, “and simply drop it in the mail.”
Some tax centers even turn these tasks into a party. In Darmstadt, Germany, the Army is throwing a bash optimistically called, “Taxapalooza!! 2K3.”
Tax experts will crank through 1040EZ and 1040A returns on Saturday, from 8 a.m. to 5 p.m. at the Cambrai-Fritsch Kaserne.
“We have games and things for the kids, we have coffee and pastries,” said a tax counselor there. OK, so maybe the taxman does bring entertainment.
“We get anywhere from 300 to 400 people in the past. ... They’re already in a good mood because they’re expecting refunds and they want it now.”
For taxpayers to get that far, they need to avoid a series of common mistakes:
Paperwork bungling. “The classic ones that we see are the record-keeping problems,” Martensen said. People lose mutual funds records or forget their capital gains.
“If you want to get squirrelly with the IRS, the last thing you want to do is not report something the IRS already has in their computer,” Martensen said. “It’s not going to be a jailable offense, unless it’s a huge amount of money. It’s going to generate unwanted correspondence, and they’re going to cut the refund.”
Taxpayers should bring a copy of the previous year’s return. That can help serve as a guide.
• Identity messes. “Taxpayers, a lot of times, don’t know what name their Social Security number is attached to,” Martensen said.
Though it sounds strange at first, it’s not uncommon. Women get married and change last names. If the Social Security Administration isn’t notified of the change, it can invalidate the number for tax purposes-sabotaging an e-file submission or causing a child exemption to be thrown out.
“It can cost thousands of dollars,” Martensen said.
• Banking mistakes. People need to bring their banking information, such as account and routing numbers, when filing electronically. They should bring a check with them to the tax preparer if unsure about the numbers.
If the numbers are off, a third party could receive a filer’s refund.
“If those numbers aren’t correct, the IRS pushes the button, and somewhere in Anchorage, Alaska, Daddy Warbucks got your tax return,” Martensen said.