Tuesday, January 17, 2017

2016 Boomer Deduction Worksheet

If you like the blog, buy my book: Everyday Taxes.  The 2016 edition has specific information in each chapter for military members.  The chapters are based on life events and are easy to read. It's inexpensive too!  If you have a Kindle, for 99 cents you can get my entertaining and useful boo: The Short, Cheap Tax Book for Everyone.

You should also check out these blog posts on Military State Rules and the Military Spouses Residency Relief Act.

Military Submariners serving on two crew ballistic missile or guided missile boats are eligible to deduct lodging and other expenses when their "Tax Home" (the sub) is unavailable. Sometimes this is called the FBM Deduction. There are many discussions of what exactly is deductible, but this worksheet will work in most situations and make it easy to determine what amounts to enter on various forms or enter into tax prep software. If you find this worksheet useful, and it saves you money on taxes, consider making a donation.

I will not be able to do the instructions for individual software programs this year.  It simply required too much time and effort, for not a lot of return.  I have had to allocate more of my time to the book.  The 2014 instructions will probably work okay:



Boomer Deduction Worksheet for Tax Preparation - 2016
Numbers are for entries into software or initial form entries.

(A) Days of Refit assist in 2016 __________
(B) Days of Off Crew in 2016 __________
(C) Distance from Home to Off Crew Bldg __________
(D) Distance from Home to Waterfront __________
(E) Rent (do not include any mortgage info here)*__________
(F) Average Monthly Utilities __________
(G) Do you go home for lunch every day? __________
(H) Number of people (including wife and kids) sharing your residence___________

(I) Total Days with boat unavailable (A) + (B) = _____________
(J) Monthly Housing Costs (E) + (F) = ______________

Form 2106 Computation Worksheet Entries:
(K) Lodging and Incidental Expenses ((I) / 30 x (J))/H = _____________
(L) Laundry and Cleaning Expenses (I) / 7 x $10 = ______________
(M) Meal Expense (I) x Per Diem Rate from Table below = ______________

(N) Business Mileage:
If (G) is NO:
( (A) x (D) x 2 ) + ( (B) x (C) x 2 ) = ______________

If (G) is YES:
( (A) x (D) x 4 ) + ( (B) x (C) x 4 ) = ______________

Per Diem Rates (assumes reasonable distance from base):
Glynn County, GA $64
Other GA Counties around Kings Bay $51
Florida (around Jacksonville) $51
Kitsap County, WA $51
King County, WA $74
Pierce County, WA $64
Other counties look up in IRS Pub 1542 or http://www.gsa.gov/portal/content/104877
*You deduct mortgage interest, taxes and mortgage insurance premiums directly on Schedule A


Monday, January 16, 2017

Master Index of Posts



I've compiled a Master List of my posts for easy reference. Not every post is included, and I have changed the order to put the most important or timely ones on top, and to group some based on categories (Military, Obamacare, Tax Software). I will try to keep this updated and just below the latest post. Please let me know in the comments if I screw up a link :) Some of the posts are OLD so be careful assuming the information is current.

If you have a Kindle, you can get a copy of my entertaining and useful book, The Short, Cheap Tax Book for Everyone for only 99 cents!

2016 Everyday Taxes Book is here!

Important or Time Sensitive Posts

Will Your Refund be Delayed (2016 Tax Year)
Tax Identity Theft State Efforts and Delays (2016 Tax Year)
The Dreaded CP2000 Letter from the IRS
Need a Copy of Your Tax Return? Get a Transcript Online! NOT! Updated advice...
The IRS did NOT Call You!
I Got an E-mail from the IRS!
I Want to Lower my Taxes!
Last Chance for 2013 Refunds
10 Simple Pieces of Tax Advice
10 Things Everybody Should Do
Check Your Withholding

Military

Military Spouses Residency Relief Act Details and Matrix
Retiring from the Military? Tax Warnings!
Reenlistment Bonus, Social Security, Compensation Repayment and Taxes
2016 Military State Tax Guide
2016 Boomer Deduction Worksheet
2015 Military State Tax Guide
2015 Boomer Deduction Worksheet
2014 Boomer Deduction Instructions for TurboTax Online
2014 Boomer Deduction Instructions for H&R Block at Home (store bought or downloaded)
2014 Boomer Deduction Instructions for TaxSlayer
2014 Boomer Deduction Instructions for TurboTax (Store bought or downloaded)
Boomer Deduction - History and References
More Boomer Deduction Information
Good Military Tax Reference
Minnesota Combat Zone Credit
SC Military Retirement Change (2016)

Tax Software

TurboTax Admits That Easy Is Better Than Accurate
Tax Preparation Software Sucks - An Open Letter to H&R Block

Business Guides

Sole Proprietorships are Bad
Avon, Pampered Chef, Party Lites, Amway, etc. MLM Tax Guide
UBER Driver Tax Guide
Tax Guide for Contractors - or - 1099MISC WTF?
Real Estate Agent Tax Guide

General Posts

Getting Married? One Piece of Important Tax Advice.
Investing and Taxes - A Primer
How Much does it Cost to File Taxes?
Reenlistment Bonus, Social Security, Compensation Repayment and Taxes
Open a Roth IRA Today! And Not For the Reason You Think
Foreign Earned Income Exclusion Warnings - Update
Charity Made Simple
How Fast Can I Get my Refund?
Make Estimated Tax Payments the Easy Way
Depreciation Recapture - an inaccurate description
Don't Touch that 401K or IRA!!
What do you do with that Big Tax Refund?
It's Okay to Get a Big Refund - Really...
Common Tax Return Errors - Updated
Common Tax Return Errors
I Have a Blog and I Want to Bitch!
Mortgage Tax Credit Information
Lesson from the Government Shutdown - Emergency Fund
Don't Pay Capital Gains Taxes if You Don't Have To!
I got a 1099C - Now What?
Cancelled Debt and Insolvency
The IRS, email and privacy...
IRS Checking Facebook?
>$250 Donation Acknowledgement
Drop Box Donations - US Marines
Tax Scams
Rental Property Guide for Homeowners
Taxes and Divorce
Random Thought about Books
Taking Care of the Client
Warning - Tax Resolution Scams
Foreign Earned Income Exclusion - WARNINGS!

Affordable Care Act (Obamacare) Posts

The Affordable Care Act (Obamacare) and People with Health Insurance
Affordable Care Act (Obamacare) for the 2014 Tax Filing Season
Obamacare, Affordable Care Act and Married Filing Separately - Warning
Affordable Care Act, Obamacare update and advice
Healthcare Law, Obamacare, Affordable Care Act Info
Weird Obamacare Strategies and Incentives - 1
Weird Obamacare Incentives and Strategies - 2
Weird Obamacare Incentives and Strategies - 3
Weird Obamacare Incentives and Strategies - 4
Weird Obamacare Strategies and Incentives - 5
Weird Obamacare Strategies and Incentives - 6

Monday, January 9, 2017

The Dreaded CP2000 Letter from the IRS!


A CP2000 notice is a type of letter the IRS sends automatically when information is reported to them that doesn't match your tax return, or when there is information on your return that they SHOULD have gotten information on but didn't. You can tell it's a CP2000 notice because it will say so in the upper right hand corner of the first page. A CP2000 looks like a bill, has a payment coupon like a bill, but it's NOT a bill. It's a “question” from the IRS about something that's missing, and contains their suggestion as to what the answer to the question is (in the form of a bill). Don't send money unless you are ABSOLUTELY certain that you owe it. You have 30 days to respond, and you should use this time to make sure you understand what you really owe. If you need more time, call the phone number from the upper right hand corner of the letter and ask for more time. DO NOT IGNORE THE IRS!

In this post I'm going to go through all the sections, and tell you what they mean, and what you should do in them. Most letters are very similar in structure, but some may not have all the sections. The sections are separated by a nice bold line across the whole page, so I'm going to make it easier to follow by putting a series of asterisks (*********) on my page where one of those lines would be You can find a sample CP2000 HERE

First. Here are some things to do immediately:

1. Take a deep breath, even if the proposed payment amount is big. A lot of times the number is smaller, or zero, and even if it is the big number, there are ways to mitigate it or pay over time. Don't Panic.

2. Make sure the letter is to YOU. Check the name in the top left and the Social Security Number in the top right. If it's not you, I would suggest calling the number on the form immediately, or sending them a quick letter (Appendix C of My Book has an example) telling them so (I'll go over exactly how to do this towards the end of this chapter when I get to the response section of the CP2000).

3. Make sure the letter is not a SCAM. There are some real a-holes out there who will stop at nothing to steal your money. If the letter was an email attachment, it's a scam. I think the only sure ways to be certain it's not a scam are to ask a professional or contact the IRS at 1-800-829-1040 (not the number on the letter). Also, if it differs significantly from my description of how the letter should flow, you should be suspicious as heck.

There are probably a few things in the envelope besides the CP2000 letter. When I refer to “the letter” I'm just talking about the pages that have page X of X in the upper right hand corner information box. The letter may also include, an envelope to send a response in, a payment voucher that you include if you send them money (this may have page X of X on it like the letter, but should be easy to identify as a payment voucher), an installment request form for if you want to make payments, and a pamphlet on your rights as a taxpayer.

Now let's go through the letter:

The first section has the IRS address, your name and address, the summary of proposed changes, a brief description of why they sent the letter, and, most importantly, the top right corner has vital details about the letter. These include the notice type (CP2000), the year in question (make sure you compare to the right tax return), the notice date, your SSN, the AUR control number (refer to this when communicating with the IRS), and the IRS contact information. It also tells you the date you need to respond by.

*******

The What you need to do immediately section: This section is generally the same on every letter. We'll be covering what to do as we go through the rest of the letter.

*******

The If we don't hear from you section: Tells you the date you need to respond by, and the fact that they will issue a Statutory Notice of Deficiency (basically a final notice) and a final bill once the date passes. Also states that they charge interest and penalties the whole time (if you pay by the due date in the letter the interest and penalty is already included). This is a good time for me to point out that ignoring the IRS is one of the two things the IRS hates the most (lying to them is the other.)

*******

The Changes to your 20XX tax return section: This is usually a table with line items from your tax return that has columns with your numbers, the IRS numbers and the difference. This can be confusing, and oftentimes not much use, but reviewing it will show you where they made the changes. The next section is often more useful. (The XX in the year obviously will be the year the letter applies to).

*******

The Explanation of changes to your 20XX Form 1040 section: This is a big section, with a lot of information. If they got a form with information you didn't include on your tax return, it will usually be listed here first. There's a catch! If the form had tax withholding, they list that separately from any income it reported, so it can look like there are a lot more forms missing than there should be. A W-2, for example, almost always has withholding, so there will be two separate lines with the same general information on the form, but one shows the withholding and one shows the income. If there are a lot of lines, it can be helpful to make a list of the forms missing (ignoring the duplicates for withholding) and comparing it with what you reported on your tax return. It's not uncommon for you to have reported everything correctly, but somehow the IRS misses it (though sometimes this happens because your employer corrects a form, but does not indicate that correctly, so the IRS treats it as a totally separate form). If all the forms were reported on your tax return, try to figure out why the IRS doesn't know that, and, even if you can't figure out why, send them a letter (Appendix C of My Book has an example) explaining the situation ( I'll go over exactly how to do this towards the end of this chapter when I get to the response section of the CP2000). If the forms aren't included, but you are sure they shouldn't apply to you (a W-2 for a company you never worked for) send a letter like we just discussed (be careful though, the name of the company on the W-2 may not be the name you know your employer by, and some jobs issue multiple W-2's if they change corporate structure.) I'm going to cover some common missing forms and give some advice on each:

W-2, 1099INT, 1099DIV: If you missed one of these on your return, the amount owed calculated on the CP2000 is probably right, but you can redo the tax return to confirm.

W-2G: This is winnings from gambling at a casino or poker room, lotteries or horse races. If you did win the money, you can deduct your losses on Schedule A up to the amount of your winnings. This requires itemizing to make a difference. You might want to get some professional help if this is a big number.

1099B: This is one of the most common missing items. Usually this represents you selling some investment. A lot of people don't report these because they lost money, or didn't make much and they thought it wouldn't make a difference. BIG MISTAKE! The IRS doesn't take what you paid for the investment (your basis) into account, so this letter is charging you taxes on the amount you sold it for, ignoring what you paid for it. Find the 1099B, use it to fill out a Schedule D, Form 4797 and/or Form 8949 and then run those numbers onto your tax return to get the RIGHT amount of tax you owe (or you might get a refund!) Make sure this number is the DIFFERENCE between your original result and the new result. Make sure to include the revised schedules when responding, and there is also a worksheet for calculating the tax on capital gains that you should include.

1099MISC: This could be for work as a contractor, rental income, or even royalties from writing a book or owning an oil well. These can get very complex and you should seek professional help unless you are absolutely sure how to handle these.

1099C: This is for having debt canceled by someone you owed money to. Don't be surprised if the event happened years ago, and/or the creditor bears no resemblance to the people you originally owed. Don't assume that just because you don't recognize the debt doesn't mean it's not yours (unless you are absolutely sure you never owed money that you didn't pay back). This is also very complex, and there are some ways to avoid paying the tax on it. My Book has very useful chapters on this subject.

There are a few other forms, but they don't come up much.

Below the list of missing items will be a list of reasons why your tax results might have changed. Some of these are explanations about the affect of the missing forms above, and others are about changes unrelated to missing forms. One very common example would be if you claimed an education credit, but the IRS did not receive a 1098T showing the expenses you paid. They also have been tending to ask for additional proof of education expenses even when they got the 1098T, especially if they are sending you a CP2000 for an unrelated missing form. Read this section carefully and it will usually tell you what they are looking for in order to prove the specific item missing. Don't worry if not every listed change asks for documents, most will simply be explaining how the missing forms affected various items on your return. Again, read this section carefully. It helps to make notes for each item of information that you need to find or verify, leaving out the things that don't require action.

*******

The Next steps section: This section just tells you not to file a 1040X for the tax return the letter refers to, but to check state returns for the year in question and all returns for other years in which you might have made the same mistake. Most states will chase you down if the CP2000 effects the state return, so be aware of this possibility.

*******

The Interest charges section: This section explains how the interest amount was calculated.

*******

The Additional information section: This section has information on obtaining forms and assistance. It should be the last section before a new page, which will be the start of the Response form.

*******

The top of the first page of the Response form has the IRS address, the response due date, a place for you to update your contact information and the identifying information in the upper right hand corner (SSN, AUR #, notice type, tax year, and notice date). You'll use this form to respond to the letter, whether you agree or not. You can usually fold the response form in a way that the address at the top of this form will appear in the window of the envelope the IRS provided for responding. If you don't use that envelope, the address at the top of the form (the one that starts with INTERNAL REVENUE SERVICE) is where you send it.

*******

1. Indicate your agreement or disagreement:

Two choices, you either agree with the amount they want you to send, or you don't. If you agree, you check the box and sign that you acknowledge that you owe the money. You are also acknowledging a few other things, but you basically had better be sending in the money with the response, or arranging to make payments. If you disagree, check that box, and move on, though there is often a fax number here that you can use to send the response form with supporting documents back to them.

*******

2. Indicate your payment option:

Four options: Full payment, Partial payment (writing the amount you are sending), No payment, or installment request form. You can check more than one, but that would generally be partial or no payment with an installment request. If you're sending in a check, make sure you follow the instructions in this section and include the voucher page from the letter. If you don't write the requested information, when the guy at the IRS messes up and separates the check from the voucher, the payment might not get credited to you. This is a good time to mention that when sending money to the IRS, it's a good idea to track when the check gets paid, and print out proof that it was. Anyway, check the box or boxes that apply. If you want to do an installment request, there is usually one included with your letter, if not, go to irs.gov and search for Form 9465.

*******

3. Authorization (optional): You use this section if you want someone to talk to the IRS on your behalf.

******* (there's not actually a line here, it's just the end of the letter.)

That's just about everything in the letter. So...

If you agree with the letter, send the response form, the payment voucher, a check and/or an installment agreement request.

If you disagree with the letter, but still calculate that you owe them money, send the response form, the voucher, a check and/or an installment agreement request. Include a letter (Appendix C of My Book has an example) explaining why you disagree with their conclusion and how you came up with your amount. Include all forms and worksheets from your tax return that have changed with the correct amounts on them. Include any proof to substantiate your claim.

If you disagree with the letter, and don't think you owe them any money, send the response form indicating that you disagree with the changes and are sending no payment. Include a letter (Appendix C) explaining why you disagree with their conclusion. Include all forms and worksheets from your tax return that substantiate your conclusion (for example, you may have failed to include a 1099C for canceled debt, but you use Form 982 to exclude it from taxation). Include any proof to substantiate your claim.

On occasion, they may owe you money! This can happen if you didn't include the information from a 1099B (investment sale) and the sale was actually at a loss. Respond the same way discussed above for not owing any money, and simply indicate in the letter the amount you think they owe you. With luck, you'll get a check...with interest!

Send all of the above to the address at the top of the response form (you can also fax them to the number provided). Make sure to include enough postage! The IRS will send you a response indicating whether they agree, and may request more information. Make sure to keep your address updated with them!

Saturday, January 7, 2017

IRS Secure Access - Everybody Needs to Do This

The IRS (and I) are highly recommending that people get IRS Secure Access setup BEFORE they need it.  Right now, you need this to easily get your tax return transcript online (you might need this to file with new software) and get a missing ID Theft PIN.  I suspect you will need it for more and more things as time passes.


The process is complex, and requires a lot of information.  It can also take a lot of time if you don't have certain things like a cell phone in your name.


It uses your credit report as one step in verifying your identity.  I'm not going to go into all the details, but here is a LINK to the information.  Read it, click on the "Get Transcript Online" button, and get it setup. 


The system will be operative sometime after January 9th.

Friday, January 6, 2017

2016 State ID Theft Delays Update

This post is an update to last year's post on the subject.  Specific updates for some states are hard to come by this year, so I updated the many state changes I could find, and left the rest the same.  At this point, I have updated information for 2016 on almost all of the states.

Tax Identity Theft is a BIG DEAL!  The federal government is paying out BILLIONS in fraudulent refunds and MILLIONS of people are affected.  In this relatively long post, I'm going to tell you how the fraud usually works, how it affects you, what the Feds are doing about it, and State by State what the states are doing and how it affects you.  Then I'm going to tell you what you can do about it.

The way this usually works is that identity thieves get your (and possibly your children's) names, Social Security Numbers and birthdays through some form of data breach.  A lot of big retail companies, insurance companies, federal and state agencies, and even the IRS have had data breaches that have probably affected you, whether you know it or not.  The identity thieves use this information to electronically file fake tax returns.  They are not technically stealing YOUR refund, but they are basically inventing a refund out of thin air.  They make up a W-2 and file a tax return in your name, having the refund deposited on a prepaid debit card like some stores offer.  The IRS doesn't get W-2 data until later in the tax season, so they have no good way of knowing the W-2 was made up.

If this happens to you, when you e-file a tax return, it will reject because you (or your kid's) data has already been used on a tax return.  This will now require you to mail your tax return in.  You would usually file an identity theft affidavit with it (possibly requiring a police report), and include proof of your identity such as a copy of your driver's license or birth certificates.  It can take a while for this to get sorted out and for you to get your refund (weeks or months) but you will eventually get it.

The easiest way for the IRS to combat this would be to delay refunds until they have the W-2 data and can safely issue refunds.  They could also disallow prepaid debit cards, or send checks when there is potential identity theft involved.  None of these options are politically palatable, so the IRS is relying on some techno stuff and working with the big tax prep companies to try to stop this.  They also have some long term plans to add codes to W-2's (This is being tested this year, so some W-2's will have codes, but using or not using these will not impact your filing).  None of this is likely to put a big dent in things.

The States face a lot less political pressure and are doing a lot of things to prevent ID fraud.  Last year one state blocked Turbo Tax filed returns for a while until more security measures were put in place.  I'm going to go state by state to tell you what they're doing.  Since a lot of it's similar, I'm going to list the more common things below, with a letter code and advice on what to do, and then just use the codes for each state, with more details if necessary.

Before I get to the details, here's some general advice: Don't share your families Social Security numbers with anyone you don't have to.  Keep this information safe and secure in your home.  Don't use fly by night tax prep services.  File early if possible.  Use an address on your return that you will definitely be able to get mail at.  Keep this address updated with the IRS and your State.  Also, buy the best tax book nobody's buying: Everyday Taxes 2016.

Here are the State's ID Theft measures (I am relying on information from State DOR websites and other sources - the information may not be completely accurate or may become outdated):

A: Requiring or requesting driver's license information on a tax return.  For most states this is optional, but your refund might be delayed if you don't provide it.  Alabama won't let you e-file without it.  Some states require extra processing without it.  My advice is to provide this to your preparer or put it in the tax software you used when asked.  Make sure to enter it accurately.

B: Flipping suspicious tax return refunds from direct deposit or debit card to paper check.  The idea here is that an identity thief won't have the picture ID needed to cash the check.  Not much you can do here except make sure you use a good mailing address, and keep it updated with the state if you move.  Also be aware if your mail is at risk by thieves and take action if it is.

C: Online or phone security questions for random or computer selected people.  These will generally be letters sent to the mailing address on the return requesting you (and your spouse possibly) to answer security questions to verify your identity.  This is usually done online or over the phone.  Failing to get the answers right will result in having to take some onerous actions to prove that you are YOU.  Ohio did this a couple years ago and it was a nightmare!  Make sure you use a good address on the return, and update it with the state tax department if it changes.  Have your tax return and the letter handy when responding.  (If I have a phone number for assistance with this I will put it in parentheses after the 'C' code.)

D: State may request additional documentation of identity by mail.  Make sure you use a good address on the return, and update it with the state tax department if it changes.

E: State will be processing refunds late and/or slow.  If they give a time frame, I will include it after the "E" in parentheses.

Here's the state rundown:

Alabama:  A (DL info required for e-file), B, C (800-535-9410), E (Mar 1st)

Arizona:  Arizona's site indicates that they are taking efforts, and that these efforts may delay refunds, but don't specify what they are.

Arkansas:  E (Unspecified)

California:  A, C

Colorado:  A (returns will require special processing actions if DL not provided), B, C (303-205-7378), D (have a strange ID verification key system involving email), E (Feb 15th at the earliest)

Connecticut:  B, C (855-842-1441)

Delaware:  A

Washington DC:  A, B (If 1st time Direct Deposit (DD), DD info changed, or gap in filing will not get DD), C (202-727-4829)

Georgia:  C, E (one source says up to 45 days, another 90!)

Hawaii:  They have not specified specific actions they are taking but say that SOME refunds may be delayed for up to 16 weeks. They advise filing early for the best chance of not having a delay.

Idaho:  A, C, D, E (7 to 8 weeks)

Illinois:  A, B (all first time filers will get refund as a check), E (late, but faster than last year which was March 1st)

Indiana:  C (317-233-1642)

Iowa:  A, B, E (Feb 1st for most, Feb 21st for returns with EITC)

Kansas:  None I can find

Kentucky:  A, E (Feb 15th)

Louisiana:  A, C (225-219-0102), E (up to 60 days)

Maine:  None I can find

Maryland:  A

Massachusetts: A, C (800-771-7144), E (4 to 6 weeks - maybe)

Michigan: A, City of Detroit refunds will all be checks

Minnesota:  Does NOT want Driver's License submitted

Mississippi:  A (Special processing will be required if Driver's License not provided), E (2/6 or longer depending on extent of fraud detected)

Missouri:  A, C

Montana:  A, C

Nebraska:  A

New Jersey:  They have not specified any specific security measures but do identify that they are watching for it and may delay some refunds to prevent it.

New Mexico:  A (Special processing will be required if Driver's License not provided), E (unspecified delays due to fraud filters)

New York:  A

North Carolina:  A

North Dakota:  A, In addition, they have stated that they are taking steps to prevent ID theft and that these steps may delay refunds.

Ohio:  A, C (855-855-7579)

Oklahoma:  A, C, D

Oregon: A, C, E (after Feb 15th)

Pennsylvania:  A, C

Rhode Island:  A

South Carolina:  A, B, E (2 to 4 weeks total to get refunds)

Utah:  A, C (801-297-2200), E (March 1st - If Utah DOR gets all documents from employer and employee refund might be processed faster than March)

Vermont:  A, E (processing after Feb 6th)

Virginia:  A (Special processing will be required if Driver's License not provided), B (If name on account doesn't match tax return the refund will be sent via check), C (804-404-4185).  Virginia will no longer load prepaid debit cards - only option is check or direct deposit, E (slight)

West Virginia:  These guys are fun.  They won't say what they are doing, but they say they will be - their words - "foolproof".  They say to expect delays and inconvenience.

Wisconsin:  A, C (608-264-4598)

Tuesday, January 3, 2017

2016 Military State Tax Guide

State Guidelines for Military (2016 values)

The latest edition of my book: Everyday Taxes 2016 contains dozens of life events like getting married, moving and having children.  In each chapter I have included specific information for military members.  Please check it out: Everyday Taxes 2016 (it's also inexpensive).  Even cheaper is my entertaining and informative book: The Short, Cheap Tax Book for Everyone.  Only 99 cents on Kindle!

The information here is subject to change as states update their information.  I will update at least weekly until mid January, so please check back just before you file.  The primary purpose of this is discussing the taxation of active duty pay, but I have mentioned retired pay for some states when I found the answer easily, but just because I don't mention pensions doesn't really tell you anything.

States with changes for 2016: FL, ME, MO, MT, PA

Military Spouses Residency Relief Act (MSRRA)
Most states have begun to treat this in a similar manner to each other. In general, the spouse of a service member has two choices for state of residency: the state they are stationed in, or the military member's state of residency. In order to claim the military members state, they must have established a domicile in that state at some time before moving to the current state. For those qualified to make the election to claim the military members state, it is important to weigh the benefits properly, for example, a spouse who works in SC married to a military resident of MI might assume that since MI does not tax the military member that they should choose this state. This would be wrong because MI will tax the non-military income of the spouse. SC is far more generous to the spouse of a service member stationed in SC. Expert assistance may be required making this determination. It can also be difficult to get the current state to stop withholding from the spouses wages. Each state Dept of Revenue has different procedures for handling this.

An added twist to this is that some states, like Maine, New Jersey and New York, have a way for residents not living in the state to claim non-residency for tax purposes.  Our best minds conclude that this would allow a military spouse claiming one of these states as their state of residency could claim non-resident status and not have to pay taxes to the state.  This has not been fought or litigated to my knowledge, so it would be wise to be aware that some states might fight it.  My advice is always to go the aggressive route, but see what the difference is going the other way, and be prepared if the state fights this later.  I personally set aside the excess refund for three years, and then spend it :)
 
Residency
A military member normally retains residency in the state they resided in when they joined the military unless action is taken to change this. The W-2 can generally be relied upon as to the state of residence of the military member. The states in which a service member are stationed will not tax the members military income unless they are residents. They will tax any income earned from other employment or business activities conducted in the state by the member and their spouses (subject to the MSRRA discussed above.) The discussions below talk about the taxation of military income for residents of the respective state.
 
Filing Requirements:
Not having to file discussed below assumes there is no withholding from the given state. A member may file even if not required and should do so if they have withholding from the given state so they can get the money back. If a member would not be required to file except for the existence of withholding, they should adjust their state withholding through MyPay so no taxes are withheld from that state. They may also consider stopping withholding even if they are required to file, for states that do not tax their income (MI for example.) Many people do not file required tax returns when there is no refund or balance due. This could result in a letter from the state requesting a return but rarely any penalties – but there can be!
 
Death Benefits:
Many states exclude death benefits and military pay for service members killed in a combat zone or while on active duty. The specifics are not discussed here. Survivors of service members killed on active duty can obtain assistance for this from CACO personnel.

States with Blue names either require a tax return or other document to be filed by military residents, or a tax return should be prepared to determine if any refundable benefits are available from that state. 
 
Alabama:
Alabama treats military residents the same as all other residents.  Alabama does not tax military retirement.
 
Alaska:
Alaska does not have an income tax. Alaska Permanent Funds Dividends are taxable on the Federal Return.
 
Arizona:
Arizona does not tax active duty military pay, and does not require filing if the only AZ source income is active duty pay.
 
Arkansas:
Beginning in 2014, Arkansas no longer taxes active duty military pay.  A tax return is still required.
 
California:
California does not tax military pay of CA residents stationed outside of the state of CA. They do tax military income of their residents when stationed in CA. They also treat military spouses generously, similar to SC. Form 540NR is used to account for this. You write “MPA” to the left of column A for non-resident military income and enter the military income in column B but exclude it from column E.
 
Colorado:
Beginning in 2016, CO will not tax active military income of military members with a home of record of Colorado.  If the only income is military income, a tax return is not required.  There's a weird provision that makes this applicable only to members whose home of record was Colorado when they joined, not people who changed to Colorado after they joined.  I'm not sure how this will be applied in real life.  Prior to 2016, Colorado taxed military residents the same as other residents unless the member was stationed outside the US for >305 days in the year.
 
Connecticut:
Connecticut allows resident military personnel stationed outside of CT to be treated as non-residents for tax purposes. This can be confusing but the point is that they are still a resident, just not treated that way for tax purposes. In order to be treated as a non-resident they must meet all three of the following requirements: 1) Not maintain a permanent place of abode in CT for the entire year (a parents house is not a permanent place of abode.) 2) Maintain a permanent place of abode outside of CT for the entire year. 3) Spend no more than 30 days in CT for any reason during the year. If they meet these requirements they can file as a non-resident and exclude any military wages from gross income and need not file unless they have other CT source income.
Starting in 2015, military pensions are not taxed by CT.
 
Delaware:
DE taxes military residents the same as all other residents.
 
Washington DC:
DC taxes resident military personnel the same as all other residents.
 
Florida:
Florida does not have an income tax.
 
Georgia:
GA taxes military residents the same as all other residents however Reserves or National Guard called to active duty for more than 90 days may be able to take a credit against their individual income tax based on their income from the National Guard or Reserves.
 
Hawaii:
Hawaii taxes military residents the same as all other residents except that they do not tax the first $6076 of reserve pay or HI national guard pay.
 
Idaho:
ID residents stationed in ID pay taxes on all military income; however, if the member was on active duty >120 days and stationed outside of Idaho they can exclude any military income earned while stationed outside of ID. If they are stationed outside of Idaho the entire year they do not need to file an ID tax return, however Idaho has a Grocery Credit that a military member is eligible for that is refundable so it is possible to get a refund from Idaho even though their was no tax withheld.  This makes Idaho one of the States that a military member should file even when not required to. 
 
Illinois:
IL does not tax military pay; however, the member must file a tax return if they file a Federal return. Military members with children who get Federal Earned Income Credit may get up to 10% of the Federal amount even if they have no taxes due to IL.
 
Indiana:
Indiana taxes military income but allows a deduction of the first $5000 of military income for the taxpayer and/or the spouse ($10000 for military couple.) If a military member changes state of residency to another state they must submit the DD Form 2058 with the tax return for the year they changed state of residency.  If you were active military and you and your spouse did not live in Indiana the entire year you do not owe county tax.  Use "00" as your county.  If your spouse remained in Indiana you BOTH owe county tax to the county he/she lives in.  Don't try to take the real estate tax deduction on property that's not in Indiana.
 
Iowa:
IA does not tax military income and military income is not used in determining filing requirements (if the only significant sources of income are military income, a tax return is not required.) Starting in 2014, Iowa no longer taxes military retirement.
 
Kansas:
Kansas taxes military income but allows a deduction for recruitment, sign-up and retention bonuses paid that are included in Federal taxable income (if the bonus was tax free to federal do not deduct it from KS. Kansas starts with Federal AGI so it is already excluded.)  The subtraction is made on Adjustments line A21.
 
Kentucky:
KY does not tax military income and does not require a tax return if the only KY source income is military pay.
 
Louisiana:
Louisiana requires a tax return from military personnel the same as any other resident; however, LA gives an exclusion of up to $30000 of military pay if the person has been on active duty outside of Louisiana for at least 120 days during the tax year. The subtraction is taken as a Schedule E subtraction, Code 10E, by entering military pay up to $30000 on the schedule.
 
Maine:
Maine allows resident military personnel stationed outside of ME to be treated as non-residents for tax purposes. This can be confusing but the point is that they are still a resident, just not treated that way for tax purposes. In order to be treated as a non-resident they must meet all three of the following requirements: 1) Not maintain a permanent place of abode in ME for the entire year (a parents house is not a permanent place of abode.) 2) Maintain a permanent place of abode outside of ME for the entire year. 3) Spend no more than 30 days in ME for any reason during the year. If they meet these requirements they can file as a non-resident and exclude any military wages from gross income and need not file unless they have other ME source income. Maine calls this the General Safe Harbor Rule.  Maine no longer taxes military pensions as of 2016.

Maryland:
Maryland taxes military residents just like other residents; however, they allow a subtraction for up to $15000 of military pay earned outside of the U.S. (Military Overseas Income.) The deduction phases out dollar for dollar as ALL military income goes above $15000 and there is no exclusion if the total military income exceeds $30000. The subtraction is taken on Form 502SU and the Military Overseas Income Worksheet is used to calculate the deduction.
 
Massachusetts:
There are no special tax benefits for military, however, the Massachusetts Dept of Veterans Affairs will give a one time payment of $500 to any resident after they served at least 6 months active duty in the military. They also have a $1000 benefit for personnel who serve in Iraq or Afghanistan.
 
Michigan:
Michigan requires military members to file a tax return; however, they subtract active duty pay from income (Schedule 1, Line 11). Military members with children who receive Earned Income Credit on their Federal return may collect 6% of the federal amount, even if they pay no taxes to MI. (This was 20% for 2011 and prior years.)
 
Minnesota:
Minnesota subtracts Active Duty Military pay from income of MN residents. If Gross Income on Federal return other than military is less than $10000, no MN return is required.
Minnesota pays $120 per month a military resident spends in a combat zone. This is paid separately from the tax return and is claimed on Minnesota form M99
 
Mississippi:
Mississippi taxes military residents the same as other residents except that they do not tax National Guard and Reserve pay up to $15000.
 
Missouri:
MO allows resident military personnel stationed outside of MO to be treated as non-residents for tax purposes. This can be confusing but the point is that they are still a resident, just not treated that way for tax purposes. In order to be treated as a non-resident they must meet all three of the following requirements: 1) Not maintain a permanent place of abode in MO for the entire year (a parent's house is not a permanent place of abode.) 2) Maintain a permanent place of abode outside of MO for the entire year. 3) Spend no more than 30 days in MO for any reason during the year. If they meet these requirements they can file as a non-resident and exclude any military wages from gross income and need not file unless they have other MO source income. If your spouse works but claims MO as your state of residency through the MSRRA their income is taxable to MO and must file a tax return if they earn more than $1200. As of 2014, Missouri exempts 75% of military retirement income from tax and starting in 2016 all military retirement income will be tax exempt.  Starting in 2016, MO is allowing you to subtract your military pay, so you don't have to file as a non resident.
 
Montana
Montana requires military residents to file a tax return but exempts active military pay from taxation on Schedule 2, Line 8. Verification of active duty status must be attached to the return.  National Guard pay is tax exempt.
 
Nebraska:
Nebraska taxes military residents just like other residents.Nebraska has implemented an incredibly complicated option to exclude certain amounts of military retirement income for some years.  It's too stupid to attempt to explain, but if you are retiring or retired from the military in Nebraska you should read this immediately:
http://www.revenue.nebraska.gov/info/military_benefits.html 
 
Nevada:
Nevada does not have an income tax.
 
New Hampshire:
NH does not have an income tax but they do tax interest and dividends. Generally these would need to exceed $2400 for an individual and $4800 for a couple.
 
New Jersey:
NJ allows resident military personnel stationed outside of NJ to be treated as non-residents for tax purposes. This can be confusing but the point is that they are still a resident, just not treated that way for tax purposes. In order to be treated as a non-resident they must meet all three of the following requirements: 1) Not maintain a permanent place of abode in NJ for the entire year (a parent's house is not a permanent place of abode.) 2) Maintain a permanent place of abode outside of NJ for the entire year. 3) Spend no more than 30 days in NJ for any reason during the year. If they meet these requirements they can file as a non-resident and exclude any military wages from gross income and need not file unless they have other NJ source income.(NJ does not consider barracks maintaining a permanent place of abode outside NJ)
 
New Mexico:
New Mexico does not tax active duty military pay however; NM residents are required to file a NM return if they were required to file a Federal return.
 
New York:
NY allows resident military personnel stationed outside of NY to be treated as non-residents for tax purposes. This can be confusing but the point is that they are still a resident, just not treated that way for tax purposes. In order to be treated as a non-resident they must meet all three of the following requirements: 1) Not maintain a permanent place of abode in NY for the entire year (a parents house is not a permanent place of abode.) 2) Maintain a permanent place of abode outside of NY for the entire year. 3) Spend no more than 30 days in NY for any reason during the year. If they meet these requirements they can file as a non-resident and exclude any military wages from gross income and need not file unless they have other NY source income. NY specifically excludes barracks as an abode outside of NY for the purpose of this rule. Also, if a NY return is required to be filed to get back state taxes withheld and this exemption results in zero income (as it usually does) the return may have to be mailed in vice electronically filed.  NY does not tax military pensions.
 
North Carolina:
NC taxes military residents the same as other residents.
 
North Dakota:
ND taxes military residents the same as other residents, however, National Guard and reserve members called to active duty can exclude their active duty pay form ND income.
 
Ohio:
Ohio does not tax military pay of OH residents stationed outside of the state of OH. They do tax military income of their residents when stationed in OH. Ohio does not tax military retirement pay.
 
Oklahoma:
Oklahoma allows military members to exclude active duty pay. This exclusion is accomplished using Schedule 511-C. Military members are required to file an OK tax return if they were required to file a federal return.

Oregon:
Oregon allows a subtraction of all military pay earned while stationed outside of OR and up to $6000 earned while stationed in Oregon (Subtraction Code 319). OR also allows military residents to be treated as non residence if they spent less than 31 days in OR, did not have an abode in OR and had a permanent abode outside OR the entire year.
 
Pennsylvania:
Pennsylvania does not tax Active Duty Military Income of residents stationed outside of PA and does not require a tax return; however, they do require the service member to mail or fax a copy of their orders stationing them outside of PA and their W-2. If filing a tax return a copy of the orders must be included when mailing the return, or sent separately to the address below.
PA DEPT OF REVENUE
NO PAYMENT OR NO REFUND
2 REVENUE PLACE
HARRISBURG PA 17129-0002
May also be faxed to: (717) 772-4193
Starting in 2016, PA exempts military pay from LOCAL taxes, regardless of where you are stationed.
 
Rhode Island:
Rhode Island taxes military residents the same as other residents.
 
South Carolina:
SC taxes military residents just like regular residents except that it does not tax reservist drill pay. SC is very generous to the spouses of military (residents of another state) in that they allow you to exclude the active duty income of the non-resident military member from the calculation of what percentage of deductions to allocate to the spouse. This generally results in 100% of the deductions against only the spouses SC income. It is very difficult to get tax software to handle this correctly. Line 1 of the SCNR should have no active duty military income in the Federal column.
 
South Dakota:
SD does not have an income tax.
 
Tennessee:
TN does not have an income tax but they do tax interest and dividends. Generally these would need to exceed $1250 for an individual and $2500 for a couple.
 
Texas:
Texas does not have an income tax.
 
Utah:
Utah taxes resident service members the same as other residents.
 
Vermont:
Vermont does not tax military pay of VT residents stationed outside of the state of VT. They do tax military income of their residents when stationed in VT. Military pay is subtracted on line 32. A tax return is not required if the only income is military pay while stationed outside VT. 

Virginia:
Virginia taxes military residents just like other residents except that they give a subtraction of basic military pay of up to $15000. The subtraction phases out dollar for dollar as income goes from $15000 to $30000 and is completely gone at $30000 of income. (If a military member made less than $15000, it would all be subtracted. If they made $20000, they get to subtract $10000.) The subtraction code is 38.
 
Washington:
Washington does not have an income tax.
 
West Virginia:
West Virginia taxes military residents unless they spent less than 30 days in WV. In this case they file as a non-resident. WV does not tax military income of reserves or national guard called to active duty by Executive Order of the President.
 
Wisconsin:
Wisconsin taxes military residents the same as other residents except that they do not tax military pay of reserves or national guard called to active duty. Rent paid by the military member in a state other than WI is allowed to be used for the School Property Tax Credit (not military housing.) If a military member is stationed outside the United States, they may take a credit of up to $300 for pay received while stationed outside the U.S.  Wisconsin does not tax military retirement.
 
Wyoming:
WY does not have an income tax.
 
Feel free to send questions to Kirk at taxadvisor@email.com
I am available to prepare taxes via mail, e-mail, fax and online approval. No fees are charged until the return is complete and you are 100% satisfied. If the fees are too high, refund too low, or we determine that a cheaper filing method is appropriate, I will return all materials and charge no fees.
I will check any individual tax return from 2012, 2013, 2014 or 2015 for free. If I find an error, I will offer to fix it for a fee if desired
 
I have made every effort to ensure the above information is 100% accurate, but I am human and the various governments love to change the rules. If you think something is wrong please inform me via e-mail at taxadvisor@email.com


Monday, January 2, 2017

Will Your Refund be Delayed?

The PATH Act has serious repercussions for this year's tax refund timing.  In short, anyone receiving the Earned Income Tax Credit or Additional Child Tax Credit may have to wait until as late as February 27th to get their refund.  Some tax professionals think people getting the American Opportunity Credit (credit for 1st 4 years of college payment) may see delays as well.

How do you know if this is you?  The short answer is that if you got more back in your tax refund than you paid in withholding (you got free money from the government on your tax return) you should be worried.  The lower your income and the more kids you have (especially children under 17) the more worried you should be.  If you are close, just plan on February 27th (assuming you file early - it still takes 8 to 15 days for everyone else after filing*) being the day you get your refund.

Specific numbers where a refund will almost certainly be delayed are joint filers with no children and income below $20,430, 1 child and income below $44,846, 2 children and income below $50,198, and 3 or more children and income below $53,505.  For non joint filers the numbers are: 0 children: $14,880, 1 child: $39,296, 2 children: $44,648, 3 or more children: $47,955.

For States, this is last year's list, which I will try to keep updated: STATE TAX ID THEFT PLANS

*Many things impact this, and you never know when for sure - details HERE