Are you a U.S. servicemember stationed overseas? If so, you need to be familiar with your U.S. tax filing requirements.
U.S. citizens and residents abroad are generally required to file income tax returns reporting their worldwide income in the same way as taxpayers residing in the United States. This includes U.S. military personnel serving overseas. I recently highlighted filing information and difficulties encountered by U.S. taxpayers living abroad, including IRS service deficiencies, in two of my blogs. This blog highlights information specific to taxpayers serving in the U.S. military.
As a servicemember stationed abroad, some payments and benefits you receive from the government are not taxable. These include combat pay, the housing and cost-of-living allowances abroad paid by the U.S. government or by a foreign government, the Overseas Housing Allowance, moving allowances, veterans’ education benefits, and travel allowances, including leave between consecutive overseas tours, among others. Other tax benefits that you may be able to claim include but are not limited to the Earned Income Tax Credit, education credits, the Child Tax Credit, and the Child and Dependent Care Credit. Note that you can count your combat pay as income when calculating the Earned Income Tax Credit, which could increase your credit even though combat pay is not taxable.
How to Get Help
If you need assistance, keep these helpful resources in mind:
- MilTax is a DOD program that servicemembers, including those abroad, can use to electronically file their returns and get tax preparation assistance targeted toward the circumstances of military personnel and their families. The services are free, without regard to income or rank, and available 24/7. Examples of individuals eligible to use MilTax include active-duty servicemembers and their spouses and dependents as well as a family member who is managing the affairs of a deployed servicemember. If you need assistance, you can schedule a consultation by phone (800-342-9647) or via chat services.
- In-person services. Military members serving abroad have limited access to the Volunteer Income Tax Assistance (VITA) program that assists low-income taxpayers, with the services available on installations in England and Japan according to the DOD website.
- Access to online accounts. It may be helpful to sign up for an IRS online account to access tax records, make and view payments, view your accounts and balances, create and view payment plans, obtain transcripts, and more. My recent blog on online accounts explains how to sign up.
- Paid preparers. If you determine you need to hire someone for assistance, I have recently identified some important things to consider when hiring a preparer. Also, the IRS provides a Directory of Federal Tax Return Preparers With Credentials and Select Qualifications that may be helpful. You can search for preparers by country. Depending on where you live, you may find there are few private tax return preparers to assist you, and some may come with substantial cost.
When to File
If you are a U.S. citizen or resident, and on the regular due date of your return you are on military or naval service outside the United States and Puerto Rico, you are allowed an automatic two-month extension of time to file your income tax return and pay income tax. This means that if you meet the criteria, and your return is normally due on April 15, 2024, you are allowed until June 17, 2024 (since June 15 is a Saturday), to file. To take advantage of the automatic two-month extension, you must attach a statement to your return explaining that this situation applies to you. Note that you still must pay interest on any tax not paid by the regular due date of your return even if you qualify for the extension.
You can also file Form 4868 to request an automatic six-month extension of time to file your return. This six-month extension runs concurrently with the automatic two-month extension. Therefore, if you qualify for the automatic two-month extension, you will only receive an additional four months. To qualify for the six-month extension, you must file the request by the return’s original due date or the extended due date if you qualified for the automatic two-month extension. You also may be able to request an additional two-month extension to December 15, which is discretionary and must be approved by the IRS. These extensions are not an extension of time to pay your tax. Therefore, you owe interest on any unpaid tax and may owe penalties.
If you are serving in a combat zone, you are eligible for an automatic extension of time to file your return, pay tax, claim a refund, and take other actions with the IRS. This extension is for the period you serve in the combat zone plus 180 days and the number of days that were left for you to take the action when you entered the combat zone (e.g., if you entered the combat zone on March 1, you add 46 days, which is the number of days between March 1 and the April 15 deadline, to your extension period). During this extension period, assessment and collection deadlines will also be extended, and you will not be charged interest or penalties attributable to the period. The extensions also apply if you are directly supporting those in a combat zone, serving in a contingency operation as designated by the Secretary of Defense, or are hospitalized as a result of injury sustained in a combat zone (limited to a period of five years if hospitalized in the United States). The deadline extensions will apply to your spouse with some limitations. Your command will notify the IRS of your deployment, but you can also write “COMBAT ZONE” in red on top of your return or email the IRS at combatzone@irs.gov with your name, stateside address, birth date, and date of deployment to the combat zone, along with documentation of service (do not include your Social Security number).
How to File
As mentioned above, MilTax is a DOD program that active duty servicemembers can use to e-file their returns for free. Other alternatives for e-filing that might be available, depending on your circumstances, include the Free File program, the Free File Fillable Forms, the Direct File pilot program, and commercial software providers. Be aware that a return will need to be e-filed through an electronic return transmitter (e.g., software provider or platform) before midnight of the due date, including any extensions of time, to be considered timely. If the IRS rejects an e-filed return before processing, it will not be considered timely filed if it is subsequently accepted after the filing deadline. This can cause challenges for taxpayers who file at or near the due date for their return.
You always have the option to mail your return to the IRS (and some forms, including international information returns, must be filed on paper). The IRS will accept a tax return mailed from a foreign country as timely filed if it bears an official postmark dated on or before midnight of the due date, including any extension of time for such filing. If you choose to use a private delivery service, you must similarly give your return to a designated international private delivery service before midnight on the due date, including any extensions of time. If you have an APO or FPO address, you should send your return to the IRS center listed in the Form 1040 Instructions for an APO or FPO address.
You can grant a power of attorney to an agent to file and sign your return on your behalf. You do this by filing Form 2848 and attaching it to the tax return. Or, if you are married and unable to sign a joint return due to serving in a combat zone, your spouse can sign the return for you even without a power of attorney. Your spouse should attach a signed statement explaining that you are serving in a combat zone.
How to Pay Tax
You can pay your federal taxes by making an electronic payment from a U.S. bank account, mailing a paper check to the IRS, or paying via a credit card. The IRS cannot currently accept e-payments from foreign bank accounts so you can only make an e-payment through a U.S. financial institution or corresponding bank. Similarly, you can only make international wire transfers, which can be expensive, from certain banks. If you are entitled to a refund, that refund will almost certainly be paid by a paper check mailed to you unless you have it direct deposited into a U.S. bank account.
Conclusion
This blog provides an overview of information that U.S. servicemembers stationed abroad need to know to successfully meet their U.S. tax obligations for this filing season. Of course, there are many other forms, publications, regulations, and statutes that might be applicable to your situation, as listed in the Resources section.
Resources
- Resources for Military Personnel and Their Families
- Publication 3, Armed Forces’ Tax Guide
- Publication 4940, Tax Information for Active Duty Military and Reserve Personnel
- Publication 5801-A, Tips & Resources for Military Spouse Entrepreneurs
- Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
- U.S. Citizens and Resident Aliens Abroad
- Extension of Deadlines – Combat Zone Service
The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.