Military Reservists, Enlistees May Get Deferral of Back Taxes

Reservists called to active duty and enlistees in the armed forces may qualify for a deferral of taxes owed if they can show that their ability to pay taxes was affected by their military service.

The deferral covers active duty members of the military services - Army, Navy, Air Force, Marine Corps and Coast Guard - and commissioned officers of the uniformed services - Public Health Service and the National Oceanic and Atmospheric Administration. Reservists must be placed on active duty to qualify. National Guard personnel not serving in a "federalized" status - that is, called to active duty specifically by the president of the United States - are not covered.

The deferral applies to taxes that fall due before or during military service, and extends the payment deadline to six months (180 days) after the military service ends. No interest or penalty accrues during the deferral period.

The deferral is not automatic. A taxpayer must apply for it. When applying, the taxpayer must show how the military service affected the taxpayer's ability to pay. A taxpayer must also have received a notice of tax due, or have an installment agreement with the IRS, before applying for the deferral.

The deferral does not extend the deadline for filing any tax returns. However, taxpayers in the armed forces may get extra time to file under other provisions, such as being stationed overseas, in a combat zone or in a qualified hazardous duty area, or if they are serving in direct support of a combat zone.

Combat Areas

The following areas of have been designated as combat areas.

1. Afghanistan and the airspace above was designated a combat zone effective Sept. 19, 2001.

2. The Federal Republic of Yugoslavia (Serbia/Montenegro)

3. Albania

4. Bosnia and Herzegovina

5. Croatia

6. Macedonia

7. The Adriatic Sea

8. The Ionian Sea - north of the 39th parallel

9. The Persian Gulf

10. The Red Sea

11. The Gulf of Oman

12. The part of the Arabian Sea that is north of 10 degrees north latitude and west of 68 degrees east longitude

13. The Gulf of Aden

14. The total land areas of Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates

15. Incerlik Air Base in Turkey

16. Pakistan, Tajikistan and Jordan

17. Uzbekistan and Kyrgyzstan

18. The Philippines

19. Yemen

20. Djibouti

While deferring back taxes is a helpful notion, a better method would be simply to waive all taxes on military personnel.

Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.

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