Langley AFB, VA –
Are you in need of free money? Is your bank account suffering a case of the holiday blues? Well, the good news is that tax season is approaching. It's good news for those who know the tax code. Knowing what credits and deductions to claim allows people to keep more of their own money.
This year, the Internal Revenue Service will refund money to everyone who paid long-distance telephone bill between March 2003 and August 2006.
The federal courts decided that telephone excise tax doesn't apply to long-distance
service and consequently, the government must refund taxes it previously collected. The IRS is making it easy for taxpayers to claim this money by offering a standard refund amount.
Instead of collecting 41 months of old phone bills, taxpayers only need to complete
one line on their tax returns to receive between $30 and $60. The refund amount reflects the long-distance phone tax paid by similarly sized households and thus, depends on the number of exemptions a taxpayer claims.
Uncle Sam also gives certain tax breaks for members of the armed forces.
A great place to start to make sure people are maximizing their tax refunds is by reviewing IRS Publication 3, the Armed Forces' Tax Guide, which is available online at www.irs.gov.
Commanders should make it a priority to make sure their troops understand financial basics and to highlight often overlooked tax deductions and credits.
Engaging junior enlisted Airmen is particularly important because those folks don't make a ton of money and may not be familiar with federal tax forms. With that mind, here are a few special tax benefits military members enjoy.
On May 29, 2006, President George W. Bush signed the Heroes Earned Retirement
Opportunities, or HERO Act. The act allows military members to count tax-free combat pay when determining whether they qualify to contribute to either a Roth or traditional
individual retirement account. Under previous law, members whose earnings came entirely from tax-free combat pay were barred from contributing to IRAs.
Additionally, the HERO Act allows members of the armed forces to retroactively make retirement contributions for tax years 2004 and 2005. Those eligible have until May 28, 2009, to make these special back-year contributions.
Military members who choose to put money into a Roth IRA don't need to file an amended return; however, those who contribute to a traditional IRA must report the contribution on an amended return. Military personnel who invest money in a traditional IRA for the tax years 2004 or 2005 may qualify for an additional refund.
Another important retirement tax credit is the Retirement Savings Contributions Credit. The IRS will give taxpayers a credit up to $1,000 for making eligible retirement contributions (e.g., Thrift Savings Plan and IRA) if their adjusted gross income is less than $25,000 for single taxpayers or less than $50,000 for married filing jointly. Married couples can claim the credit for each spouse and can receive up to $2,000.
Some Airmen may find it difficult to save for retirement, but if they know how to claim tax credits, they may have a little more money to save.