How to file military taxes
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List your gross income for the year on your 1099 or 1040A form by including all regular pay, re-enlistment bonuses and other special payments. Factor in any other income listed on W-2 forms. Write in all your personal information and indicate income received under boxes set aside for other forms of income, such as rents and royalties. As a member of the military, you may exclude certain items, including housing and travel allowances and many health expenses (see Resources).
Exclude any pay earned while you were in a combat zone during any part of one month. This entitlement applies to any military member who was in a combat zone for at least one day during one month of combat. As of 2010, Afghanistan and most of the Persian Gulf were considered combat zones. Income exclusions may also be applied to those who were not in those zones but still took
part in related military operations.
Email the IRS to let the agency know your status if you’re going into a combat zone right before tax time. As of 2010, the agency provided a dedicated email address--combatzone@IRS.gov--for this purpose. The IRS will note your income exclusion for the month and will freeze any pending audits or collections. The IRS sends answers about tax account information only through regular mail, but will sometimes answer email questions about updates to combat zone exclusions.
Fill out a 4868 tax extension form (see Resources) if you’re on active duty and living in the U.S. but need more time to file your taxes. Provide all your personal information, including both your and your spouse's Social Security numbers. Indicate your estimate of total tax liability for the year in the Part II section on the right side of the form. This gives you an additional four months to get your taxes filed.Source: ehow.com