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Combat Zone Tax Provisions

Several allowances are made for military service under the tax code. In general, service members on active duty in combat zones can suspend the filing and the payment of their taxes while on combative service. They have this option but may continue to file tax-related documents and pay taxes if they choose to. Members of the military do not have to inform the IRS of their combative service because this is done automatically by the DoD. Excludable pay based on combative zone service or imminent danger should be reported for you on your W2. However civilians will have to notify the IRS of their status and request suspensions in writing.

Prior to the Military Family Tax Relief Act of 2003, military members on duty in the Navy and on certain types of other duties were given a two-month automatic extension past April 15th to file their taxes.

The Military Family Tax Relief Act of 2003 suspends the filing of taxes and the payment of taxes for anyone on combat duty and anyone who is taken as a POW. This includes armed forces, Red Cross personnel and also any civilian personnel that are required to be in a combat zone. The President determines the combat zone and length of combative activities. Currently three such zones exist including: the Arabian Peninsula, the Kosovo Area and Afghanistan. The President dictates when and where combative zones are located.

Continuous hospitalization time due to combat zone injuries may also qualify for a tax suspension. If the hospitalization is continuous within the United States, spousal income is still taxable but the service member’s individual income tax filing can be suspended. Anyone Missing In Action or taken as a POW is also entitled to the suspension of tax plus 180 days after they return.

Military members who serve in combat zones for any part of a month are also exempt from paying taxes on that month’s paycheck. This exclusion is based on enlistment pay scales. For officers, this exclusion is calculated upon the highest enlistment pay plus imminent danger pay. In 2004, the amount that could be excluded from federal income tax was $6315.90 a month. This exclusion from paying taxes also extends to certain types of military personnel who are injured while in combat zones and who require continuous hospitalization.

Imminent danger pay and payment for unused leave is also excluded from tax if acquired while in a combat zone. Reenlistment signing bonuses, awards, additional pay for extra entertainment of troops and student loan repayments are also excludable from tax if earned while on combative duty.

It is somewhat strange that members of the military aren’t given more tax exclusions and suspensions given the tremendous nature of their personal and family sacrifices. However, the suspensions and exclusions that do exist help to make these difficult types of duty a little bit more rewarding.

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