How to Prepare for Tax Season as a Military Service Member

Tax season can be a stressful time, especially for military personnel who face unique tax rules and requirements. From combat pay to multi-state filings, navigating the tax system as a service member requires extra attention to detail. But with the right preparation, you can make tax season a breeze while maximizing your refunds and minimizing headaches.

Here’s a step-by-step guide to help you tackle tax filing for military personnel with confidence.

1. Gather All Necessary Documents

The first step in preparing for tax season is getting all your paperwork in order. Military service members often have additional forms and documents to include in their filings, so it’s important to start early. Here's a checklist to get you started:

W-2 Form: This shows your income from military pay and is provided by the Defense Finance and Accounting Service (DFAS).

1099 Forms: If you have any secondary income or investments, you may need these forms as well.

Records of Taxable and Non-Taxable Income: Include combat pay, Basic Allowance for Housing (BAH), and Basic Allowance for Subsistence (BAS).

Receipts for Deductions: Keep track of expenses like uniforms, relocation costs, and education-related expenses.

Bank Statements and Investment Records: For any income or deductions related to savings, TSP contributions, or investments.

Having all your documents ready will save you time and help ensure you don’t miss anything important.

2. Understand Military-Specific Tax Rules

As a military service member, you’re eligible for several tax benefits that civilians don’t have. But understanding these rules is essential to taking full advantage of them.

Combat Pay Exclusion: If you served in a combat zone, part or all of your income may be tax-free. The exclusion rules can vary by rank and length of deployment, so be sure to check your eligibility.

Extended Deadlines: Deployed service members or those stationed overseas often qualify for extended tax filing deadlines.

Residency Rules: Military personnel often move between states, which can complicate state tax filings. Many states offer tax exemptions for military income or residency benefits that can lower your overall tax burden.

Relocation Costs: If you had a Permanent Change of Station (PCS), certain moving expenses might be deductible.

Understanding these rules can help you save money and avoid filing errors.

3. Maximize Your Deductions and Credits

Military service members have access to specific deductions and credits that can reduce taxable income or increase refunds. Some common ones include:

Uniform Expenses: Costs for required uniforms that aren’t reimbursed by the military.

Education Credits: If you’re using military education benefits, you may qualify for credits like the Lifetime Learning Credit.

Retirement Contributions: Contributions to your Thrift Savings Plan (TSP) can reduce your taxable income.

Review these potential benefits to ensure you’re not leaving money on the table.

4. Decide Whether to DIY or Hire a CPA

Tax filing can feel like a do-it-yourself task, but for military personnel, the complexities often require professional expertise. Hiring a CPA who specializes in tax filing for military personnel can save you time and stress while ensuring your return is accurate.

Why Choose a CPA? A CPA with military tax expertise understands the nuances of combat pay, multi-state filings, and other military-specific rules. They can help you avoid mistakes, maximize deductions, and ensure compliance with IRS regulations.

Peace of Mind: If you’re deployed or handling demanding duties, a CPA takes the burden of tax preparation off your plate so you can focus on your responsibilities.

Audit Protection: Should the IRS have questions about your return, a CPA can represent you and address the issue on your behalf.

5. Use Military Tax Resources

The military offers several free resources to help service members file their taxes:

Military OneSource MilTax: A free tax preparation and e-filing software tailored for military personnel.

On-Base Tax Centers: Many military installations provide free tax assistance during tax season.

While these resources are helpful, they might not offer the same personalized guidance as a CPA, especially if your tax situation is complex.

6. Start Early

Don’t wait until the last minute to start your tax preparation. Beginning early gives you plenty of time to gather documents, review your options, and consult with a CPA if needed. Plus, filing early can help you avoid penalties or delays in receiving your refund.

Final Thoughts

Tax season doesn’t have to be stressful, even with the unique challenges faced by military personnel. By gathering the right documents, understanding military-specific tax rules, and seeking professional help when needed, you can simplify the process and maximize your tax benefits.

Remember, tax filing for military personnel isn’t just about compliance—it’s also about ensuring you’re taking full advantage of the benefits you’ve earned. With the right preparation and support, you’ll have one less thing to worry about as you serve our country.