Filing Taxes When a Military Member Is Deployed

You’re away from your family. Your living quarters aren’t exactly luxurious. You might not be getting the supplies, or even the information, you need. Safety is an issue. Peace of mind can be hard to find.

And that barely scratches the surface of the difficulties you can face when you’re deployed.

Under those circumstances, thinking about taxes might seem like piling on. But there is no escape from the long arm of the IRS, regardless of whether, or where, you’re deployed.

At least the IRS acknowledges the challenges and has tried to address some of the hardships of filing taxes while deployed. It makes some of the steps a little easier for deployed service members. It offers tax extensions for deployed military personnel in special circumstances. And it provides significant tax breaks for those who have been deployed in a combat zone.

There is help, too, in the way of free or discounted military tax services from the government and private accountants.

It still probably won’t be fun, but the filing process might not be as burdensome as you fear.

How to File Taxes When a Service Member Is Deployed

Like for taxpayers in the civilian world, being organized will make filing smoother. That means making sure you’ve collected all the documents you need and being certain you understand the requirements for when and where you should file your return. Some of those requirements might not be clear when you’re filing from a deployment far away from home.

The best place to start is the dedicated page called Tax Information for Members of the Military on the IRS website.

Here is a primer for some of what you’ll need to know and do.

• Obtain your military W-2 form online: Yes, the IRS will snail-mail your W-2 to you, but that won’t be timely or efficient when you’re deployed. With your Common Access Card or personal identification number, you can access your W-2 online through myPay.
• Corral the data the IRS wants: It’s a bad moment when you’ve been sailing through the process and suddenly run into a section that asks for a document or information you don’t have at the ready. Not every deployed taxpayer will need all of these, but among the material the IRS might want you to include are 1099 forms, last year’s tax return, deduction eligibilities, receipts for charitable donations, child-care records and receipts, and information about rental property income, investments and mortgages. If you’ve assembled it all before you begin, you’re ahead of the game. Oh, and don’t forget to have access to the Social Security numbers of your family members and, if you’re filing electronically, your bank account and routing numbers.
• File your return in your home state: This might seem like a no-brainer, but it might not be so obvious when you’re far, far away from your permanent address: You still pay state taxes while deployed. It’s worth remembering that working spouses who live with their service member in a state that isn’t their permanent address might not have to pay income tax in the state where they are employed.
• Have a Power of Attorney in place: This is good advice in general, and it’s especially important if someone is filing your tax return for you. That person could be your spouse or another family member, or someone eligible to practice law before the IRS. But whoever handles it for you will need the legal authority to make decisions, including financial decisions, in your absence. You’ll need to provide him or her with all the tax-related information you’ve gathered along with the Power of Attorney document.
• Know your deadline: You’re already aware that the tax deadline usually is April 15, and that you can file your return anytime between January 1 and then. If you can get it done in that time frame, great. But know that military members on active duty outside of the U.S. or Puerto Rico automatically qualify for a two-month extension. There are other special extensions available to some deployed members of the armed forces, too, which we’ll deal with a little later.

Filing Joint Returns When a Service Member Is Deployed

When it’s possible, filing a joint return with your spouse makes sense because it generally gets you the largest refund. But it can be problematic when you’re deployed thousands of miles away from your legally-significant other. After all, both of you have to sign the return.

That’s why Power of Attorney can come in handy. If your spouse has it, he or she can sign for you. An IRS Form 2848, which is more specific to tax filing, will also work, but remember that each partner in the joint filing will have to fill out and submit a Form 2848.

The IRS accounts for a number of specific situations in which spouses can file jointly when one partner is deployed, including:

• When one spouse is overseas on active duty: The most obvious, but certainly not the most time-efficient, way to jointly file taxes while a spouse is deployed is for one spouse to prepare the return, sign it, and send it to the other for the second signature. Another way is through Form 2848 when the overseas service member stipulates on it that the spouse in the U.S. can sign the return on his or her behalf.
• When a spouse is in a combat zone: In that case, the spouse at home can sign for the deployed military member even without Power of Attorney, as long as he or she attaches a statement to the return to the effect that the other joint filer is serving in a combat zone.
• When a spouse is in a missing status in a combat zone: It’s possible for the spouse at home to file a joint return in this situation for any year beginning not more than two years after the end of the combat zone action, even if it is subsequently determined that the missing spouse died before the tax year covered by the return.
• When a spouse is incapacitated: If injury or disease makes it impossible for a service member to sign the return, the spouse can sign his or her name in the proper space as long as it is followed by the words “by [the spouse’s name and relationship, meaning husband or wife].” The spouse filing the return must attach a dated statement that includes information such as the reason the other filer couldn’t sign and that he or she has granted permission for the signature.
• When a spouse has died during the year: As long as the surviving spouse hasn’t re-married before the end of the year, a joint return can be filed by writing “filing as surviving spouse” in the signature area.

Tax Deadline Extension for Deployed Members

Remember that automatic two-month extension we mentioned earlier? The one available to military members on active duty outside of the U.S. or Puerto Rico? That’s a pretty good start on pushing back your filing deadline. You get it by attaching a statement to your tax return, explaining your situation and why it qualifies you for the extension.

By the way, if you’re serving in the United States, you’re also eligible for an extension. You can request a six-month delay in filing your return by submitting Form 4868 before the normal tax deadline of April 15.

Wherever you’re deployed, though, most of those extensions come with a caveat. If you owe tax, the IRS meter that charges interest and late payment penalties starts running on the date of the original deadline, on or around April 15. If you want to avoid those fees, the IRS requires you to pay at least 90% of your tax total by the original deadline, extension or no extension.

You won’t be charged interest or late fees if you’ve requested a filing extension and the government owes you a refund some of the taxes you’ve already paid. So, a word to the wise: It’s a good idea to know earlier rather than later whether you expect to get a refund or write a check.

But let’s try not to be too hard on the IRS. It does allow deployed military members more deadline breathing room than it gives civilian taxpayers.

Tax Extensions Can Be Stacked

Sometimes, the automatic two-month extension isn’t long enough. When that’s the case, you can extend the extension. If you can’t get your taxes filed by June 15, you can ask for another four months by filing Form 4868. That takes you to the middle of October.

Even then, you have the possibility of adding yet another two months. By sending a letter to the IRS by October 15 that describes the military reasons you need more time, you can request a discretionary extension that delays your deadline for 60 more days, or until December 15.

This next example might seem confusing because it deals with a combat duty extension (see below). Say you’ve been granted the extension for serving in a combat zone, been redeployed, and worked out the formula (which we explain below) for a new filing deadline. All good. But if you get deployed back to a combat zone before that deadline arrives, then you can stack one more extension onto it.

Please refer back to that last paragraph once you’ve absorbed the details in the next section.

Combat and Hazardous Duty Extensions

At tax time, the IRS especially tries to alleviate the hardships at-risk military personnel face.

For openers, the filing extension deadlines are relaxed even more for military members deployed in a combat zone. If you were deployed in a combat zone during the tax season for which you’re filing your return, the IRS looks at the dates of the deployment to figure out your deadline. It starts by counting the days you were deployed before the normal filing deadline, and then adds 180 days to that number. When you’ve carried all the 1s, you tack the sum on to your redeployment date to get to your filing deadline.

Here’s an example of what this means:

Let’s say your combat zone deployment began on March 13 and the normal tax deadline is April 15. That’s a difference of 33 days. Add 180 to that and you’re at 211 days. If you return home from deployment on, say, August 10, your filing deadline will be 211 days after that. So, the date your return is due would be March 2 of the following year … unless of course you’re already back in a combat zone by then.

Combat Zone Pay Tax Exclusion

Another tax perk for service members deployed to a combat zone: The IRS doesn’t levy federal income tax on combat pay, which is any form of government income – including salary — you earn while you are deployed in a combat zone. Even if you are in the combat zone for only a day, your pay for the entire month is excluded on the federal level from taxable income.

The tax exclusion applies, too, if you were hospitalized as a result of wounds, disease or injury you sustained while serving in a combat zone.

If you are an enlisted service member in a combat zone, there is no limit on the amount of federal tax-exempt compensation you receive during a combat zone deployment. The exclusion for officers, however, is limited to the maximum amount of enlisted pay.

A couple of things to keep in mind as you prepare your return:

• The base pay you earn during a combat zone deployment is still subject to Social Security tax and Medicare tax.
• You do pay state taxes while deployed. Your combat zone compensation will be exempt from federal income tax, but it might still be subject to your home state’s income taxes.

Other Tax Exclusions for Combat Pay

In addition to your basic pay, other forms of compensation earned while deployed to a combat zone are exempted from federal income tax. They include:

• Compensation for food.
• Compensation for housing.
• Reenlistment or continuation bonuses, if the service member reenlists in the same month he or she served in a combat zone.
• School loan repayments.
• Imminent danger/hostile fire pay.
• Leave benefits, if you sell your accrued leave earned while you were deployed in a combat zone.
• Awards and other financial incentives you received from the military for suggestions, inventions, or scientific achievements you made while you were in a combat zone.

Deferral of Tax Payment

You might still be in a tax bind while you’re deployed, of course, even with the extensions and breaks the government makes available. If that’s the case, you have another opportunity for some relief by requesting to defer your installment payments of income taxes.

You’ll have to still be in the service, and you’ll have to notify the IRS that your military responsibilities are the reason for your inability to pay your taxes. If you’re in that situation, the IRS might work with you on a plan that allows you to stop making payments for as long as you’re deployed and gives you 180 days from the end of your deployment to make good on what you owe.

You won’t be charged interest or have to pay penalties for the deferral period if you make the payments within those 180 days.