With a month left before the start of tax season, service members should begin gathering documentation to file their 2013 taxes, the director of the Pentagon's office of family policy and children and youth said.
In a recent interview with American Forces Press Service and the Pentagon Channel, Barbara Thompson suggested visiting the Military OneSource website for tax filing resources, and to learn what will be necessary to file, such as W2 forms, Social Security numbers and receipts for deductions such as child care, education, medical expenses and donations, among other write-offs.
And tax preparers at Military OneSource will do short-form tax filing free of charge for service members and their families, Thompson said.
Relocations and deployments have tax implications, Thompson noted. For example, deployed service members can receive an extension to file taxes after the normal April 15 filing date, she said. "It's very helpful to have someone who is experienced to help you through the cumbersome issue of taxes and tax returns," she added.
The tax preparers at Military OneSource are up to date on changes in tax laws, and can answer military-specific questions, Thompson said.
Installations also offer volunteer income tax assistance to service members and their families, while certain banks and credit unions provide education and training on tax preparation, Thompson said. She advised that service members organize their taxes by starting a file beginning each Jan. 1 for the following year's tax papers, such as receipts and other write-offs.
"You don't want to wait until the last minute," she said.
Service members and families who prepare long-form taxes with deductions such as mortgages and rental properties might want to consider hiring a tax expert to file for them, Thompson said. "It's best to get advice to make sure you have everything covered," she added.
People who do their own taxes need to stay on top of current tax information, Thompson said. "Sometimes tax laws change, so you have to be really smart about doing your own taxes," she added. States' tax laws often vary, too, she said, and because of relocations, some service members have to file local taxes in more than one state.
"That's where [tax consultants] can really be of great value to make sure you know what the requirements are for states," Thompson said.
Filing federal and state tax returns usually results in either a tax return or money owed back to the government. Expecting to receive a tax return, but instead finding out that money is owed can be a shock, Thompson said. Looking at W2s to determine how much money in taxes is being withheld is a good indicator of whether or not one will owe money, she suggested.
Service members who receive a tax return face important decisions on what to do with the money, Thompson said.
"Do you use it to buy down debt, or put it in a savings account?" she asked, advising people to not blow their tax refunds in a spending frenzy of unnecessary purchases.
Tax return also is well-spent in a retirement savings account, she added. "It's important to think about what you're going to do with that money," she advised, "and how you can best utilize it for your financial well-being."
Meeting with a financial planner to learn the "lay of the land," and what tax deductions might apply to a service member's finances is a good idea, Thompson said. "It's really important to be savvy about that."