Tag Archives: taxes

Hmm, what to do with your tax refund? 6 tips for military families

Hmm, what to do with your tax refund? 6 tips for military familiesWill your family receive a tax refund this year? The average tax refund is around $2,800 and slightly more for direct deposit refunds. Even if your refund is more or less than the average, we have a few tips to make your money work for you.

Military families encounter fluctuations in household income for a variety of reasons including: deployment and training incentives; bonuses; loss of income from a spouse’s job; or cost of living adjustments after a military move. A tax refund may provide the funds you need to help account for the changes in household income. Here are some tips to consider:

  • Review your emergency savings funds. Do you have money set aside for unexpected expenses? Out of pocket costs for an upcoming Permanent Change of Station (PCS)? Consider starting or adding money to a designated emergency savings account.
  • Pay down debt. Use your refund to pay down or pay off a high interest credit card.
  • Contribute to your retirement plan. An extra contribution to your service member’s Thrift Savings Plan (TSP) or your own retirement account can go a long way.
  • Deployment savings. If your service member is deployed, consider adding your refund to the Savings Deposit Program. A total of $10,000 may be deposited each deployment and will earn 10% interest annually.
  • Save for college. If you have children, you can contribute to a college 529 savings plan. Going back to school as an adult? You can put your refund towards a 529 plan for yourself, too.
  • Don’t spend your refund before your receive it. Wait for your refund to arrive before you spend the funds. You can track the status of your federal refund online.

Before you are tempted to spend the extra money on a shopping spree, review your current financial situation. It may be helpful to talk to a financial counselor at your local military installation or through Military OneSource to help you decide how to put your refund to good use.

How will you use your tax refund? 

katiePosted by Katie Savant, Government Relations Information Manager at the National Military Family Association

Military families and Earned Income Tax Credit – what you need to know

Military families and Earned Income Tax Credit - what you need to knowFor many of us, tax season comes with a sinking feeling. The incomprehensible forms, piles of documents to sort through, and the unwelcome prospect of writing a large check to the IRS leaves us with a splitting headache.

However, tax season does not have to bring bad news. In fact, some military families may find that they are eligible for an income tax credit that will allow them to keep more of the money they have earned, thanks to the Earned Income Tax Credit.

The Earned Income Tax Credit (EITC) is a refundable tax credit for low to moderate income families. To qualify, your taxable income must fall below a certain threshold. For 2012, a married couple with two children may qualify for the EITC if their earned income and their adjusted gross income are below $47,162. Remember that allowances, such as Basic Allowance for Housing (BAH) are tax-exempt. Combat pay is normally not taxable but you can elect to have it included in your Earned Income if doing so increases the amount of your credit.

Intimidated? Don’t be. There are plenty of resources to help military families tackle tax season. The most important thing to remember is that in order to qualify for the EITC you must file a tax return, even if you do not owe any tax or are not required to file. For more information about the EITC, check out the IRS online guide for families and individuals.

Do you think you might qualify for the EITC? What other tax tips do military families need to know? 

eileenPosted by Eileen Huck, Government Relations Deputy Director at the National Military Family Association

Tax filing tips for military families

Tax FormDoes anyone else feel the tax “season” is longer than a traditional holiday season? The commercials for tax prep start before the New Year’s Eve ball drops and continue through the Cadbury egg commercials. Then suddenly it’s April 15.

Try to avoid the last minute stress of filing your taxes by being prepared. It may be helpful to review information specific to military families and your tax situation. The IRS Tax Information for Members of the U.S. Armed Forces contains online videos and short articles which highlight military specific issues such as combat pay, filing deadline extensions for deployed service members, and tax laws that provide special benefits to service members.

Free tax filing services are available through Military OneSource. The program provides free access to a customized version of the basic H&R Block at Home® online tax filing product. This customized product allows for free federal filing and up to three state returns. Military OneSource also provides tax counselors via telephone at 1.800.342.9647. The counselors cannot prepare tax forms, but can help you make an informed decision about your tax situation.

TurboTax also recently released a Military Edition that, until February 14, is free for junior enlisted military personnel (ranks E1 to E5).

Military installations offer Volunteer Income Tax Assistance (VITA) consultants to assist with free tax advice, tax preparation, return filing, and much more. Locate the closest VITA site using the Armed Forces Legal Assistance Services Locator.

We’ll highlight additional tax-related resources in the upcoming weeks. What tax filing tips would you share with other military families?

katiePosted by Katie Savant, Government Relations Information Manager at the National Military Family Association

One toe over the edge: the Fiscal Cliff and military families

One toe over the ledge: the Fiscal Cliff and military familiesSo we’ve managed not to topple over the cliff, but it looks like we’ll be hanging on the ledge of uncertainty for a few more months. In the wee hours of the New Year, Congress passed a compromise bill to keep the country from heading over the edge. Like any compromise, the bill didn’t please everyone, but it did fix several issues important to military families, including a one-year extension of the Medicare/TRICARE doc fix, which will help protect families’ access to health care. The compromise legislation did not include an increase to the debt ceiling and the Treasury Department estimates it will run out of ways to stay within the current ceiling by late February or early March, right about the time sequestration is now set to start.

And what of those automatic cuts to federal spending, known as sequestration? The best the Congressional leaders and the President could do was to postpone it for two months. That might sound like a good thing, but this delay also means uncertainty about what will or could be cut for military installations, schools that educate military kids, defense contractors, and all other military and community agencies that support military families.

Other provisions included in the compromise bill would:

  • Create a permanent fix for the Alternative Minimum Tax to prevent taxpayers from moving into higher tax brackets simply because of inflation—this fix was needed immediately to keep taxpayers from paying higher taxes on their 2012 income.
  • Permanently extend the Bush-era tax rates for all families earning less than $450,000.
  • Increase the tax rate on capital gains and some estates.
  • Freeze Congressional pay.
  • Extend federal unemployment benefits for one year.
  • Extend provisions in the expiring farm bill by one year. (This means milk prices won’t skyrocket, as you may have seen in the news.)

The compromise bill did not extend the lower payroll tax rate of 4.2% in effect during the past two years through economic stimulus legislation. Therefore, the payroll tax workers pay to support Social Security will immediately return to 6.2%. Workers will see this change in their first paycheck of 2013. Experts estimate that the family earning an average of $50,000 per year will pay an additional $1,000 in payroll taxes this year.

While the New Year’s Congressional action gives the government and taxpayers some breathing room, we’re not out of the woods yet. The temporary delay of the sequestration cuts will combine with other pending budget events to continue the fiscal uncertainty facing our Nation.

The Association appreciates the actions by Congress and the President to provide the fix to Medicare and TRICARE doctors. We remain concerned about the failure to address the potentially devastating sequestration cuts to both civilian and military programs that could have a negative impact on military families. While the delay in sequestration will temporarily protect some needed support services, it also continues the uncertainty, and a military community at war needs certainty that the Nation supports its service. We call on our Nation’s leaders to forge a more permanent solution that will preserve the strength of our service members and their families.

How do you feel about the outcome of the compromise bill and the negotiations surrounding it?

Joyce RaezerPosted by Joyce Raezer, Executive Director at the National Military Family Association