Several tax law changes could significantly affect how service members and their families file their 2015 income tax returns.
“It’s probably the biggest set of changes in many years” said Army Lt. Col. Samuel W. Kan, executive director of th eDefense Department’s Armed Forces Tax Council, which oversees the military’s Volunteer Income Tax Assistance program.
For example, this is the first year service members received an IRS Form 1095-C, which documents their 2015 minimum essential health care coverage and shows their compliance with the Affordable Care Act.
IRS Form 1095-C
“People haven’t seen these forms before,” Kan said, adding that service members must keep the 1095-C with their tax records, and bring it with them if they use a tax preparer. Service members who entered or left the military in 2015 or had other life-changing circumstances that created a health care coverage lapse have an issue that must be addressed with a tax preparer, he added. Those members might have multiple 1095s, depending on their individual circumstances.
Taxpayers without minimum essential health care can incur IRS penalties, Kan said. In addition, taxpayers who enrolled in the Health Insurance Marketplace and had advance payments of the Premium Tax Credit paid directly to insurance companies on their behalf, such as members who worked in the civilian sector and then joined the military in the middle of the year, will need to file their tax return to reconcile those advance payments.
Some ‘Extenders’ Permanent
Service members should be aware that certain “tax extenders” – once temporary measures to stimulate the economy – have become permanent, Kan said. Some of those important permanent changes include the state and local general sales tax deduction, especially for those members from states without a state income tax, the educator expense deduction for members who teach and incur expenses, and the American Opportunity Tax Credit, for members with college expenses, he said.
Lots of Resources for Help
Many resources exist for service members to file their 2015 tax returns, whether they are stateside or deployed, Kan said.
The online IRS Publication 3, the Armed Forces Tax Guide, addresses a wide range of issues that might affect members of the military, Kan said. In addition, state tax guides will soon be available through Military OneSource, installation tax centers and legal assistance offices.
Visit a tax center and learn what documents to bring to a tax preparer before scheduling an appointment, Kan advised, adding that it’s essential to bring last year’s income tax return to ensure that members get all the tax benefits to which they may be entitled.
File for Free
Free tax-filing and preparation assistance for service members is available in a variety of ways, he said. First, “brick-and-mortar” tax centers on installations educate military members, while VITA certified tax preparers accurately prepare and file the member’s income tax returns while they wait. Legal assistance offices also can give advice on other tax services provided at nearby installations, even though they may be operated by other armed services, Kan said.
Second, Military OneSource tax kiosks are available at some installation tax centers and offer self-service computers so service members can prepare and file their own tax returns, assisted by VITA certified tax preparers who are onsite to help.
Third, members can use Military OneSource from home, assuming they are filing very simple tax returns without such deductions such as passive loss carryovers on rental property, he noted. Service members who want to use Military OneSource from home should be sure to read the instructions before starting a return to make sure they don’t waste their time by starting a return and then realizing that the return cannot be properly prepared, Kan noted.
Although service members can prepare their own tax returns and do the necessary research by using search engines and the IRS web site, Kan said, due to the many changes in this year’s tax code, self-filers should show their returns to an tax preparation expert at an installation tax center to make sure they haven’t missed any benefit to which they are entitled. Few things are worse than leaving your own money on the table, he added.