ASK A JAG: WHAT TIPS DO YOU HAVE FOR TAX SEASON?
Alexandra K. Fleszar, Capt, 374 AW Legal Office
“What tips do you have for tax season?” With 15 April right around the corner, taxes are on all of our client’s minds. We in the 374 AW Legal Office want to make sure that everyone in the Yokota community gets the best advice on filing this season. In Ask A JAG, we answer Yokota’s burning legal questions in a straightforward, legalese-free newsletter. Today’s edition covers our top tips for tax season.
Is April 15 really our deadline overseas? What if I was in a combat zone?
This answer is often the biggest surprise for our clients: if you are living anywhere outside of the United States, you do not have to file your taxes until 15June. Those who are taxed by the United States but live abroad are given an automatic two-month extension to file your taxes. Be careful though: if you owe taxes and choose to pay after 15 April, the money you owe will accrue interest and incur penalties. If you think you might owe but still need more time to file, work with a tax preparer to estimate your taxes and send in an estimated payment; you can follow up with the filing later on. To claim this extension, your taxes must be marked as an overseas filing when submitted, and include a statement noting that you were abroad on 15 April. Thank Japan for reducing the stress of filing by April with those extra two months.
If you served in a Combat Zone during 2017, you have even more time to file. Not only do you receive an automatic 180-day extension (in addition to the two-month delay for living abroad), you also receive extra days if you remained deployed during the filing season. Here’s how it works: say you deployed to Afghanistan on 1 September 2017 and returned to Yokota on 28 February 2018. First, you live abroad, so your taxes are not due until 15 June. Second, add 180 days to that 15 June deadline for your 2017 deployment – this brings your due date to 12 December 2018. Finally, add the 58 days that you could not file during the filing season from 1 January through 28 February, because you were still deployed at the time. That gives you almost an extra year to file your taxes, with a deadline of 8 February 2019. Though this extension is automatic for service members, it’s good practice to give the IRS a heads-up so that they don’t accidentally bill you. Schedule an appointment with the Yokota Tax Center or Legal Office for more information if this situation applies to you.
Do I claim Head of Household if my spouse is not earning income?
The Head of Household filing status often confuses taxpayers. Many people think this status is claimed by the primary income earner in a married, two-parent family – especially if that person is the only income-earner of the couple. This is not the case. To claim Head of Household status, you must be unmarried at the end of the year while supporting dependents in your home. This status was designed to give single parents a break on their taxes in the same way that only married couples had historically received. Though certain circumstances allow one parent going through a separation to claim Head of Household while supporting kids, this is the only exception to the rule that you cannot be married and claim the Head of Household status. Married couples need not worry – you receive more benefits when filing jointly than as any other filing status, even if only one of you is earning income. You can’t claim Head of Household, but it also wouldn’t help you overall.
What deductions and credits are available to me and how can I claim them?
Tax law is one of the most intricate legal fields. While it would be hard to list all available tax breaks in one article, there are a few that we see frequently that you may not know about.
Child and Dependent Care Credit: While most people know that having a child under the age of thirteen automatically provides a $1000 deduction, not everyone knows that you can claim certain expenses incurred for child or dependent care as a credit. Money paid to obtain care for a minor child or dependent adult in order to allow you (and your spouse, if filing jointly) to work can be claimed to help lessen your tax burden. This credit can only be claimed, however, when you have “earned income” – a term that the IRS defines specifically. If you think you may qualify for this credit, bring your dependent care expenses and information on your income to your tax prep appointment.
Education Credits: There are two education credits that cover different types of expenses. The American Opportunity Credit is generally available for those pursuing a degree in an accredited higher education institution, while the Lifetime Learning Credit is for those simply taking courses to acquire or improve job skills without necessarily earning a degree. While the rules on eligibility differ for each, a fine point on both is that they will only cover expenses paid out of pocket that were not covered by scholarships, the G.I. Bill, or tuition assistance.
Retirement Contribution Credits: You may receive a tax credit if you contributed to an IRA, 401(k), or other qualified employer savings plan. You may not qualify for this credit if you also took distributions from these accounts in the past or during the tax year, or if your adjusted gross income is higher than the phase-out limit for your filing status. But if you saved money in a retirement account, let your tax preparer know to find out whether you qualify.
There is one key to claiming any credit that bears repetition: document, document, document. You can’t claim tax benefits for expenses or contributions that you can’t prove, so in this case, the more paper documentation you have, the better off you are. When in doubt, bring the receipt, account summary, or form that you think might help you and show it to your tax preparer.
When do I need to bring in the big (tax) guns?
While Military One-Source and VITA Prep Sites like the Tax Center are great resources, there are certain situations that require serious expertise from someone who lives and breathes taxes. One example would be the sale of property; selling your home involves both significant tax implications and complicated math to determine the depreciation and original cost basis of the property. Another example would be if you have multiple businesses, or a business with revenue over $25,000. The taxes and deductible expenses involved with maintaining businesses at this level can change from year to year – meaning it’s a good idea to consult with someone who has worked permanently in the field over many years. If your tax situation calls for a professional, seek help from a Certified Public Accountant or major tax preparation company.
What do I need to bring to a tax preparer?
Certain information will always be necessary in a tax preparation session to make sure that you can file your return and receive it as quickly as possible. Federally accepted photo ID is the first step: to protect your identity all preparers will need to verify who you are. In the same line, preparers will need you to prove that the Social Security or Tax Identification Number that you are providing is actually assigned to you, so bring the originals card or forms with you. You want to have your bank account information, including routing and account transit numbers, on hand to have your return direct deposited to you as quickly as possible. Finally, if you are visiting a Military VITA Prep Site like the Yokota Tax Center, you want to fill out and bring Form 13614-C, the IRS Intake/Interview & Quality Review Sheet. Bringing these items, plus all of your tax documentation for the year, will help your preparer file your return quickly.
Where can I get help preparing my taxes?
There are multiple resources available to help you prepare and file for the 2017 season. If your taxes are relatively simple, you may want to try the Miltax Filing Service on Military One-Source. This free service provides secure self-prep and e-filing software for eligible service members, their families, and survivors. The software provides free technical assistance and access to a OneSource tax consultant. It is available at http://www.militaryonesource.mil/taxprep.
If you’re worried about self-filing, the Yokota Tax Center is here to help. Our dedicated volunteers prepare and e-File your returns by appointment only, Monday through Thursday, 0900 – 1600. To schedule an appointment, call 315-225-4926.