IRS Update Will Help Bosnia Troops Answer Tax Questions
By Master Sgt. Stephen Barrett, USA
American Forces Press Service
WASHINGTON, July 22, 1996 Although income tax time is months away, those deployed to operations Joint Endeavor and Able Sentry may have questions about their tax status. These questions may range from their tax-exempt status to adjusted filing deadlines.
The Internal Revenue Service recently issued IRS Notice 96-34, its interpretation of the law President Clinton signed last spring granting tax benefits to Balkan-based troops "as if" they were serving in a combat zone. Included are questions and answers on tax issues the troops face.
Officials with DoD's compensation office said the IRS patterned the questions and responses on its Publication 945, "Tax Information for Those Affected by Operation Desert Storm."
One question deals with how DoD will record hazardous duty zone pay. Service members annually receive a Form W-2 that records income earned over the tax year. To determine the difference between taxable and tax-free income, the IRS said DoD will issue a Form W-2c to those who deployed. Those forms will clearly indicate the service member's tax-exempt earnings. Compensation officials said they are issuing revised 1995 W-2c forms soon.
The IRS notice also addresses questions about civilian personnel supporting the U.S. mission, troop hospitalization, individual retirement accounts, overseas phone calls and home ownership issues. It also provides telephone numbers to stateside and overseas IRS offices that can answer other deployment-related tax questions.
The tax bill Clinton signed is retroactive to Nov. 21, 1995. For warrant officers and enlisted members, all military pay earned in the contingency zone of Bosnia, Croatia and Macedonia is tax-free. The law excludes the first $4,250 of officers' monthly pay for 1996 -- a major increase from the monthly $500 exemption that existed since 1966 under the old law. All other monthly income remains taxable.
The new law also granted special filing extensions and waivers of interest and penalties for all service members and DoD civilians deployed in support of Joint Endeavor.
The law grants the benefits in what defense officials call a "two-circle approach." The inner circle encompasses the qualified hazardous duty area of Bosnia, Croatia and Macedonia. Service members assigned within the circle or who fly missions in it receive the complete tax benefit of tax-free income, extensions and waivers. The inner circle also includes Serbia and Montenegro, which means U.S. forces would be covered should they need to move into these areas of the former Yugoslavia.
Service members assigned to Operation Joint Endeavor support areas outside the first circle generally fall within the second, wider circle. They are eligible for the extensions and waivers but do not qualify for tax-free income unless mission requirements move them into the inner zone, officials said.
To qualify under the new law, officials said service members must deploy outside the United States and away from their permanent duty stations in support of Joint Endeavor. The extensions and waivers apply at least 180 days after the individual departs the deployment area for home station.
Troops or family members in the United States can direct Joint Endeavor tax questions to the IRS by calling 800-829-1040. They may also e-mail questions to firstname.lastname@example.org.
The IRS also has offices in Rome and Bonn, Germany, to assist overseas taxpayers with federal income tax questions. Service members may contact the Rome office by calling 39-6-4674-2560, or via fax at 39-6-4674-2223. The IRS-Bonn branch is at 49-228-339-2119, or via fax at 49-228-339-2810.