Legislation May Provide Tax Relief to Troops in Bosnia
By Master Sgt. Stephen Barrett, USA
American Forces Press Service
WASHINGTON, Jan. 5, 1996 Legislation introduced in the House of Representatives last month may provide a tax break for service members deployed in Bosnia-Herzegovina.
Lawmakers are deciding whether to expand the current law to allow for tax benefits to be received during certain contingency operations designated by the president. Current law states military pay is exempt from tax only while in combat zones.
Bosnia is not a combat zone. Air Force Lt. Col. David Pronchick, the armed forces tax counsel, said in the history of the law, there's been only three declared combat zones -- Korea, Vietnam and the Persian Gulf.
"The problem is that Operation Joint Endeavor is a contingency operation," said Pronchick, "so in order for service members to receive tax benefits, the law has to be changed. This change could take the form of a broad policy change or a one-time change specific to Operation Joint Endeavor."
One bill, House Resolution 2778, would give President Clinton the authority to grant tax exemptions for Operation Joint Endeavor service members. Because the mission exposes U.S. service members to warring factions and combat hazards, the bill would provide benefits as if they were in a combat zone.
A second bill, House Resolution 2776, proposes a permanent change allowing the tax benefits for certain contingency operations. Pronchick said this bill would not only cover combat zones, but also contingency zones "encompassing peacekeeping and humanitarian missions which expose U.S. service members to danger. If somebody is on a dangerous mission and in arduous conditions, they may receive the tax benefits," he said.
Another benefit of the resolution increases the officer tax exemption to $2,400 -- up from the $500 exemption officers have received since 1966. All pay after the first basic $2,400 remains taxable. All enlisted and warrant officer pay earned in combat zones remains tax exempt.
Pronchick cautions there is no guarantee these proposals will be implemented. Efforts to obtain tax breaks for Somalia were not enacted.
While the future of tax exemptions rests in House committees, many deployed service members will receive a break in filing 1995 tax returns. The Internal Revenue Service will grant up to an eight-month extension for service members deployed in support of Operation Joint Endeavor on or after March 1.
Normally, the IRS filing deadline is April 15. With the extension, service members deployed to Joint Endeavor have until Dec. 15 to file their federal tax returns.
Besides extensions, IRS is also suspending penalty assessments, halting IRS examinations and placing balance due accounts on hold for all serving in Joint Endeavor. However, service members who owe taxes for 1995 will face interest payments on that debt. Pronchick said IRS has no right to waive interest payments under IRS statutes. The current rate for late payment is 9 percent.
IRS officials say the only exception would be for reservists activated for deployment. Under the Soldiers' and Sailors' Relief Act, if reservists are unable to pay on time, they must request a deferment. This request must include a copy of activation orders and a statement, supported by evidence, that the taxpayer's ability to pay has been "materially impaired."
If IRS grants a deferment, reservists would see no interest charge on their taxes for the initial period of reserve service, plus six months. If IRS denies the request, it calculates interest for amounts due at 6 percent.
Service members without their 1995 W-2 forms prior to deployment may file their federal tax returns using their year-end leave and earnings statements, according to IRS officials. Tax officials also ask deployed personnel to write "Operation Joint Endeavor" at the top center of their return. This will help IRS service centers properly process returns and document authorized extensions.
Pronchick added because state tax laws differ, service members should check with their unit tax officer or state tax board on state tax exemptions.