Academic journal article Journal of Accountancy

Filing Considerations for Active Duty Military

Academic journal article Journal of Accountancy

Filing Considerations for Active Duty Military

Article excerpt

Active duty members of the U.S. armed forces have special tax return filing considerations for both state and federal purposes. It is important to consider how a service member and his or her spouse's residency affects their tax liability, as well as where their income is earned. The Servicemembers Civil Relief Act (SCRA) provides certain protections for service members and their families. This act is not limited to taxes, but many of its provisions relate to taxes. Below are a few common examples.

A service member's residency is not based on where he or she is permanently stationed. Residency is based on the state the service member claims as a "home," typically the state where he or she enlisted. Confirmation of a resident state can be found on the military member's Leave and Earnings Statement.

A military spouse has the option to file either in his or her resident state or state of duty station. This choice becomes significant for community property valuation. Service members' spouses will not pay tax on any income earned while living in a nonresident state and, instead, will pay taxes to their resident state if they meet two requirements. The spouse of a service member must (1) be living in the nonresident state for the sole purpose of being with the service member, and (2) the service member must be stationed in the state subject to Permanent Change of Station orders (SO U.S.C. [section]571(c)). A practitioner should research the tax benefits offered by each state for which the client is filing, since benefits for active duty personnel are common, yet vary by state.

Service members have exceptions for when tax payments are due, as well as penalties and interest. If a service member's ability to pay an income tax liability is materially affected by his or her military service, tax is deferred up to 180 days after termination of service, without any accrual of interest or penalties for that period (50 U. …

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