Tips to Save Money AND Heartache This Tax Season

Filing income tax forms can be a complicated and somewhat painful process. Gathering documents is a chore. Tax forms can seem confusing to the uninitiated. And military families face additional obstacles at tax time: they may not know about certain military-specific tax provisions that can benefit them, and they are also prey to certain tax schemes that target the military community.

Here are some important tips to keep in mind for this tax season.

  1. Put some cash in your pocket by claiming unreimbursed expenses. While the Tax Cuts and Jobs Act now prevents civilians from claiming unreimbursed moving expenses, active duty military can still claim out-of-pocket costs associated with a PCS move. Reservists can also claim unreimbursed reserve duty-related expenses on IRS form 2106 if they must travel more than 100 miles from home.

    Both of these deductions can be taken even if the service member cannot itemize their return.

  1. Make sure you understand the Military Spouse Residency Relief Act (MSRRA) and the Veterans Benefits and Transition Act of 2018 – they may save you money! Military spouses have always had a tough time retaining their state residency when their service member has a PCS move to another state. The MSRRA addressed the problem but did not entirely fix it.

    Enter last year’s Veterans Benefits and Transition Act, which allows a military spouse to choose the same residence as the active duty service member, even if they have never resided with the spouse in that state.

    Why should you care? If you’re a working spouse and you are stationed in a location that has state income tax, and your spouse is from one of the 9 states with no tax, you can claim their state residency and potentially pay no state income tax.

  1. Free filing (and tax help!) is available. While there have been cutbacks in funding for some installation tax centers, service members still have many options to file their taxes for free. A whole list of options is available here. Military members can access Military OneSource’s MilTax, which includes FREE tax software and other resources. If there are questions, MilTax consultants who are well-versed in military-specific tax issues are available via phone or chat.

    If you prefer in-person tax preparation help, search for a Volunteer Income Tax Assistance (VITA) site near you.

  1. Beware of tax fraud and predatory tax schemes. Tax season brings out scams. There’s a long list of things the IRS will NEVER do, but chief among them is they will never call or text you and demand immediate payment.

    Service members should also be wary of tax preparers who claim to be able to get their refund to them faster. Some type of advance loan product with very high fees is typically what is being pushed. These are very much like payday loans, and the rates can soar to 200 percent APR or higher.

    The fastest way to get a refund is to e-file the return and have the IRS direct deposit it to your bank account. Most refunds are deposited within 21 days. You can even split the refund into multiple accounts using tax Form 8888.

    If a service member is truly in financial distress and needs their refund sooner, they should consider going to their local family service center: they might be eligible for emergency family assistance.

While to paraphrase Benjamin Franklin, taxes are inevitable, they don’t have to be stressful. Keeping these tips in mind could save military families some money and some heartache.

Want to build wealth and reduce debt? Take the Military Saves Pledge and then visit militarysaves.org for savings tips and inspiration!

Tip of the Day

  • Written by Katie Bryan | December 16, 2013

    Check out the guide from @CFPB that helps you to know which questions to ask when shopping for a financial advisor http://ow.ly/rrjYO 

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