It’s tax time! This is a highly anticipated time of year for military families expecting to see a refund. (For those who may owe, not so much.) Either way, there are a ton of resources to get you through the complicated filing process–and most of them are free for service members. Before you decide where to file, there are a few items to put on your to-do list.
Get documents in order
Whether you’re filing for yourself or using a service, make sure you have all the paperwork required so your return is not delayed.
- Social security numbers for the service member, spouse, and dependents. This should not be an issue because we live and breathe that information, courtesy of the Department of Defense.
- W2s for all employers from 2017. For military personnel, here is the timetable for when myPay is releasing tax statements, according to branch and status:
|Reserve Component Air Force, Army, Navy||Available|
|Active/ Reserve Component Marine Corps||1/11/2018|
|Military Retiree 1095||1/12/2018|
|Active Component Air Force, Army, Navy||1/20/2018|
|Civilian (DOD/Non-DOD) 1095||1/23/2018|
- Form-1099 for any 2017 contract work that exceeded $600.
- Documents related to mortgages, student loans and education expenses, childcare, and/or donations. To see a full listing of IRS recommendations, click on tax checklist.
Military spouse residency: Where to claim
Military families move– often–and understanding state residency is a confusing topic, so much so that a law finally addressed it. President Barack Obama signed the Military Spouses Residency Relief Act (MSRRA) in 2009, which amended the Servicemembers Civil Relief Act to include tax protections for spouses. It basically says that a military spouse can maintain a tax domicile while moving state to state, as long as he or she is moving into that state because their husband or wife are stationed there with military orders.
For example, if you are a resident of New Jersey and your service member gets stationed near Marine Corps Base Camp Lejeune in North Carolina, and you earn income in North Carolina, under MSRRA you may be exempt from paying income tax in North Carolina, but you would still have tax liability in New Jersey.
There are other details involved, including certain aspects of how you maintain your residency so it is best to refer to your state’s guidelines for more information on resident versus nonresident status.
Decide how you’re filing
Once you have all of your documentation organized, you have several options when deciding how you will file:
- (Free) Installation tax center with the assistance of a trained service member: Check locations here.
- (Free) Online through Military OneSource: Each year, service members and dependents can access MilTax filing software. This year, it will be available on their website starting Jan. 17.
- (Free) Online through the IRS official website.
- (Free – sort of) FreeTaxUSA offers no-cost federal filing for military and veterans, but state returns do cost $12.95.
- (Free or Discounted) Depending on your rank, Turbo Tax offers free services for E5 and below; and a reduced rate for E6 and above.
Tax return submitted. Now what?!
Expecting a large refund may feel like you hit the jackpot. . . and you may have it spent before the direct deposit hits your account. Before you feel compelled to plan a vacation or splurge on a new pair of Jimmy Choo’s, make sure you and your spouse talk about it.
Jennifer Hemphill, accredited financial counselor and author of Her Money Matters: The Missing Truths From Traditional Money Advice, recommends looking at the full picture of your financial situation before spending the refund.
“I would say first look at what struggles you’ve had throughout the year, maybe there wasn’t enough money for groceries or you were just making ends meet, or you don’t have an emergency fund. Set that money aside. Also, take a look at some upcoming big expenses that you may have, maybe you need a new washer or dryer,” she said. “Be more strategic and put a plan to it. That doesn’t mean the tax refund goes to just one place, you can divide it up.”
Jen’s other tips:
- A tax refund means you overpaid in taxes to the government (basically you gave the government a no-interest loan). Consider adjusting your withholdings so you’ll have extra money every month and do something useful with it.
- Avoid impulsive purchases by creating a 24- to 48-hour rule. If you still want the item after that window of time, then purchase it.
- Have a clear vision of what you want. Are you just going through the day-to-day grind of working to pay bills? It’s important to decide what you want–a savings, investments, what are those goals. You and your spouse should have a conversation to decide how that money can best achieve your objective.
If you have questions during any stage of the filing process, Military OneSource does offer phone support Jan. through Apr. 18 from 7 a.m. to 11 p.m. EST at 800-342-9647. After Apr. 18, it is by appointment only.
By Bianca M. Strzalkowski