Hoyer: Military Should Also see Pay Freeze

From The Hill.com:

The second-ranking House Democrat said Monday that President Obama’s move to freeze the pay of civilian federal employees should also be extended to military personnel.

Majority Leader Steny Hoyer (D-Md.) said including the military would have increased savings and add “an element of fairness." He made the comments in a statement about he president’s announcement of a two-year pay freeze.

“While I appreciate that the president reduced the length of his proposed pay freeze from three to two years,” Hoyer said in a statement, “it would have produced significantly more savings had that sacrifice been shared between federal civilian and military personnel — with a strong exception for the members of our military and civilian employees risking their lives on our behalf in Afghanistan, Iraq, and anywhere else they are serving in harm's way.”

Hoyer will become the Minority Whip of the 112th Congress. He has made budgetary reform a signature issue, and he said he would review Obama’s proposal “for its balance between fiscal responsibility and the need to recruit and retain a federal workforce able to provide the level of service that the American people expect.”

The Maryland Democrat also urged the administration to back a more comprehensive program to reduce the nation’s soaring deficit, along the lines of proposals from the president’s fiscal commission and a separate debt panel.

Tax Issues for Active Members of the Military

Last week my team put together another great tax tips video. In this new episode, host James Owens discussed some tax issues faced by active members of the military. Check out the embedded video below, and be sure to head over to my YouTube channel to see all of my other helpful tax videos.

Army admits 'unimaginable, unacceptable wrongs' at Arlington Cemetery

After months of investigating, Army Secretary John McHugh told Congress that as many as 211 graves at Arlington Cemetery were misidentified or mis-located, as reported by CNN. The US’s most sacred burial ground for members of the military suffered from mismanagement. According to McHugh, “by placing everyone in charge, no one was in charge.” McHugh has vowed to do “everything necessary and possible to right the unimaginable, unacceptable wrongs.”

According to the investigation, the dysfunctional management lacked any clear lines of authority, and without proper oversight documents went missing, recordkeeping was poor, and next-of-kin were failed to be notified of any problems.

The findings have created uproar, with lasting repercussions. The ranking Republican on the House Armed Services Committee stated, “The evidence provided by the I.G. goes far beyond inadvertent noncompliance by over-worked contracting officers," McKeon said. "I find these practices to be unacceptable."

To read about the proposed solutions to these horrifying issues, read the full article here.

Obama extends benefits of gay federal workers

In a move that goes beyond the memo President Obama signed last June which permitted same-sex partners to use the government’s long term care insurance and other fringe benefits, he extended the range of benefits to same-sex partners of eligible federal workers to include access to medical treatment, relocation assistance, credit unions, and fitness centers. These benefits do not cover uniformed members of the military, however, but the House is working on a repeal of the “Don’t Ask Don’t Tell” law, so there is a chance they will cover same-sex couples of military personnel next year.

This extension of benefits comes in perfect alignment each year with June now being the Lesbian, Gay, Bisexual, and Transgendered Pride Month declared by Obama. Obama also ordered federal agencies last year to identify other benefits that could be offered to same-sex partners. Unfortunately, he is prevented by federal law from providing full federal benefits to same sex-partners. Read the full article here.

Tax Issues for Active Members of the Military

Joining a division of the United States military is a major life decision. Active members of the military face a lot of different challenges than the average American, including a specific set of tax laws, deductions, and credits. Luckily, much of the confusion surrounding military taxes is based on rumors and misconceptions. To help any of my readers serving our country I have put together the following article explaining taxes for members of the military.

180-Day Rule

Despite what many believe, military personnel are not required to file their tax returns while away on duty. If you are married filing separately, your spouse will not need to worry about filing a tax return on your behalf either. However if you file a joint return, then your spouse – with a power of attorney – will need to file a return before the standard April 15^th deadline. Once you return home, you can apply for an automatic extension of up to 180 days. This extension applies to filing your return, paying your taxes, contributing to IRA's and making claims for a refund.

Combat Pay

Some members of the military fear they will be unable to pay their taxes while away for combat. Fortunately, active members of the military serving in a combat zone get the special privilege of not having to pay Federal income taxes on any income made during that time. For officers, there is a cap at the highest rate of enlisted pay, as well as any hostile fire or imminent danger pay received. Since having tax-free income is so rare, the IRS encourages members with such an opportunity to contribute the money to an IRA or tax friendly savings account.

Travel Expenses

Military personnel often need to travel to fulfill their duties. If you have to travel more than 100 miles to perform any reserve duties, all un-reimbursed travel expenses can be deducted from your taxable income. If you need to permanently re-locate stations the IRS will even allow you to deduct reasonable un-reimbursed moving expenses. Likewise, certain job search and travel expenses are deductible.

Call to Duty Penalties

Some active members of the military will sacrifice a significant portion of their earning in leaving their regular jobs to serve in the military. If you are in this situation and are forced to withdraw funds from a retirement account, then the IRS will frequently waive the associated penalty. However, this can be a tricky situation and I recommend speaking with a tax professional experienced with military taxes before making any withdrawals.

Military Academy Costs

Members of the military who received payments from a Coverdell Education Savings Account or Qualified Tuition Program are exempt from the 10% tax on funds not used for educational expenses. However this is only so long as they are attending a U.S. Military, Naval, Air Force, Coast Guard or a Merchant Marine Academy and the payments do not exceed advanced education costs.

Uniform Up-Keep Expenses

Some military officials are required to wear certain uniforms wherever they go, which can result in a hefty dry cleaning bill. Luckily, most members of the military can get these fees reimbursed or waived completely. However, if you are forced to pay for these fees out of pocket then you can deduct all of the costs.

Further Tax Complications

The U.S. tax code is complicated and difficult to understand, especially for active members of the military. Fortunately, most personnel qualify for free tax assistance from VITA (Volunteer Income Tax Assistance Program). The program utilizes volunteers trained by the IRS who provide free tax help to members of the military. These services are usually available on base or in your local area. For more information on military tax issues be sure to check out IRS Publication 3.

Happy Veterans Day

Happy Veterans Day! In honor of the brave servicemen and women who have fought for our Country, the Roni Deutch Tax Help Blog has posted a new entry with 10 tax tips for Veterans. You can find a section of the advice article below, but be sure to check out the full version here.

1. Keep Records

To qualify and receive most Veterans’ tax benefits, you will need to verify your status as a U.S. Veteran. Therefore, it is important to keep your records in a safe place with your other financial documents. If you do lose any of these records, you will need to contact the Department of Veterans Affairs to obtain new ones.

2. Know About Property Tax Exemptions

There are a few types of property tax exemptions available to Veterans. The first is the Veterans' Real Property Tax Exemption that allows a qualifying Vet to take a partial exemption for property purchased with eligible funds. The second is the Cold War Veterans Exemption, which exempts those who fought in the cold war from paying property taxes. However, some counties and cities have opted out of this program so be sure to check with your local tax department.

Last but not least, the alternative Veterans exemption is available to Veterans with residential property that have served during wartime and/or received an expeditionary medal. Similar to the Cold War Veterans Exemption, some local governments may opt out of offering this exemption. With any property tax exemptions you should always speak with a local tax professional to make sure you do not pay any taxes that you are not required to.

3. Taxes on Income and Retirement

Unfortunately, any income you receive from the military that is based on age or length of service is taxable income and must be included on your tax return. However, you will usually not have the standard taxes withheld from your checks like you would with a standard paycheck.

4. American Recovery and Reinvestment Act

The American Recovery and Reinvestment Act of 2009 provided some assistance to struggling families and businesses through the making work pay tax credit. However, the credit unfortunately created problems for many veterans. After it was enacted, the new law reduced the amount of money being taken out of American worker’s paychecks. Although Veterans are not eligible for the credit, they will still have fewer taxes withheld as part of the new “one-size-fits-all” IRS guidelines. Therefore, you may be surprised to find you owe a significant tax liability in April.