TAX FORGIVENESS
When you lose a loved one, the last things you want to think about are finances and taxes. However, as a military survivor, you may be entitled to certain benefits. For instance, tax liability can be forgiven — or refunded if already paid — if a service member dies under specific circumstances. Regulations differ based on whether the death occurred in a combat zone or as a result of terrorist or militaryaction.
Tax forgiveness is not automatic. Surviving spouses or the individual filing the tax return must submit a claim.
Here are answers to some common questions about tax forgiveness.
Under what circumstances can a deceased service member’s tax liability be forgiven?
• Tax liability is the entire sum of the money you pay annually to the federal government in taxes. This can be forgiven or refunded if a service member dies under any of the following circumstances:
• While on active duty in a combat zone
• From wounds, disease or other injury received in a combat zone
• From wounds or injury incurred in a terrorist or military action
Which tax years are forgiven?
This varies based on the circumstances of the death:
• For combat zone-related deaths: The Internal Revenue Service, or IRS, forgives the service member’s tax liability for the tax year in which the death occurred and any previous tax years ending on or after the first day of active duty in a combat zone. Any remaining unpaid taxes from previous years are also forgiven.
• For deaths outside a combat zone, but in direct support of military operations: The same forgiveness benefits apply as those for combat zone-related deaths.
• For terrorist or military action related-deaths: The IRS forgives the service member’s tax liability for the year in which the injury occurred (even if death occurs in a separate year) and one year prior. So, a service member that dies in 2015 from injuries sustained in a 2014 terrorist attack would receive tax forgiveness beginning in 2013.
How does tax forgiveness affect joint filing?
• If you and your spouse typically file jointly, forgiveness or refund only applies to the deceased service member’s portion of your tax liability.
• When you submit a claim for tax forgiveness, you’ll need to determine the portion of your joint tax liability for which the service member would have been liable if a separate return had been filed.
How can I submit a claim for tax forgiveness?
• Tax forgiveness isn’t automatic, so you’ll need to submit a survivor’s claim:
• If the tax return has not yet been filed: File a Form 1040 with the service member’s W-2.
• If the tax return has already been filed: File a separate Form 1040X for each year in question.
You can identify your claim by writing one of the following on the total tax line on Forms 1040 or 1040X:
• Iraqi Freedom-KIA
• Enduring Freedom-KIA
• Kosovo Operation-KIA
• Desert Storm-KIA
• Former Yugoslavia-KIA
If the service member was killed in a terrorist action, write KITA on the front of the return and on the line for total tax.
You’ll also need to include:
• A computation of the decedent’s tax liability
• Form 1310: “Statement of Person Claiming Refund Due a Deceased Taxpayer”
• A certification from the Department of Defense or the Department of State
Military OneSource tax consultants can provide information about your tax situation. You can also access tax preparation and filing services through Military OneSource by calling 800-342-9647. You also have the option of reaching out for financial counseling through your service’s long-term survivor care program:
• Army’s Survivor Outreach Services
• Marine Corps’ Long Term Assistance Program
• Navy Gold Star
• Air Force Families Forever
USING YOUR ONLINE SURVIVOR BENEFIT REPORT TO SET FINANCIAL GOALS
Mapping your financial future can be tricky, especially during difficult times. But if you’re a surviving family member of a service member who died on active duty, you don’t have to navigate your options on your own.
People’s day-to-day financial goals tend to look a lot alike. They want the security that comes from being able to pay their bills on time, live in a comfortable home and have enough to eat. Once that checklist is met, priorities vary. You may be thinking about buying a house, or going back to school. Maybe you’re focused on your children’s education now, but want to travel or start a business someday. Whatever you’re contemplating, setting financial goals is the first step.
You can log on, 24 hours a day, 365 days a year, to the interactive online survivor benefits report. It includes current and estimated future benefits for everyone in the household from the Department of Defense, the Department of Veterans Affairs and the Social Security Administration.
Here are some ways the interactive report can help you establish financial goals:
• Explore “what if” scenarios — Survivors can plug in scenarios — such as changes to marital, education and disability status — to see how they would impact current and projected future benefits. Current and “what if” reports can be saved or printed. If a spouse remarries before age 55, for example, the Survivor Benefits Plan annuity is suspended, but can be reinstated if the remarriage ends by death or divorce. If the surviving spouse remarries at age 55 or older, the annuity continues uninterrupted for the duration of the spouse’s life.
• Explore home ownership: The interactive report provides a current and future picture of your finances. That can help you decide whether buying a home is a good fit, and if so, when you should become the proud buyer behind the “sold” sign. Surviving spouses who have not remarried may be eligible for a VA home loan guaranty, which they can use to buy a home, build a home or refinance an existing loan. Additional information about the VA home loan program is available on the VA website.
• Explore education: Whether you’re thinking about your own education or a child’s, the interactive report can help you crunch the numbers. Surviving spouses are eligible for educational benefits for up to 20 years after the date of a service member’s death. Children are normally eligible to use their educational benefits between the ages of 18 and 26. This benefit may be used to pursue an associate, bachelor’s or graduate degree, courses leading to certification, technical or vocational school, apprenticeships and various other educational programs. For an overview of these benefits, visit http://www.benefits.va.gov/gibill/index.asp
• Explore a secure retirement: Even if you are decades away from retirement, it’s important to plan financially for that time in your life. The interactive online survivor benefits report can help you do that by showing not only how much money you are receiving now, but also projecting your future benefits. That will help you decide how much extra money to set aside now toward your retirement years.
• Explore your wish list: It’s important to have your building blocks in place, but financial planning doesn’t stop there. Don’t forget to build in some fun. Maybe you’ve always wanted to take your children to a specific amusement park, or travel to Paris and see the Eiffel Tower. Using your interactive online survivor benefits report can help you make those dreams a financial reality too.
To access these new online survivor benefits reports, you will need to have a DS logon premium account and password. If you do not have a DS logon premium account, you can visit the Defense Manpower Data Center’s website to create one.
If you need assistance with recovering passwords or accessing reports, contact the Family Assistance Support Team at 877-827-2471 or by email at osbr@afsc.com
Surviving spouses, parents and children can also turn to Military OneSource for information, resources and counseling support. Help is available 24 hours a day, seven days a week by phone, at 800-342-9647, and online. Updates to “A Survivor’s Guide to Benefits” are available on the Military OneSource Casualty page.
Recipients of Servicemembers’ Group Life Insurance are also entitled to a lifetime of no-cost financial advice from FinancialPoint, an independent company whose team of professionals are experts in handling a wide range of financial matters. Beneficiaries can access this service online 24/7 to request a financial plan, and call or email for quick answers to simple financial questions. In-person meetings with financial professionals are also available upon request. Find out more about this service from the Department of Veterans Affairs.
SCAMS THAT TARGET SURVIVORS
Life after the death of a loved one can understandably lead to a distracted state of mind. Unfortunately, distraction and vulnerability – two normal side effects of grieving – can make surviving family members targets for scam artists. Protect your family, your identity, your finances and yourself from scam artists as you go through your grief journey. Keep your family from being victimized by these common scams that target survivors:
Funeral and cemetery scams: The military services cover most, if not all, funeral costs for active-duty service members, including military funeral honors and a burial flag. Ask questions before agreeing to any added expenses that could be scams. Talk with your casualty assistance officer or mortuary officer about funeral and burial options, and about government entitlements and reimbursements.
Unnecessary charges: Beyond your loved one’s funeral and burial, scammers count on you not knowing what’s accessible to you at no cost. Do your research or talk with your casualty assistance officer or mortuary officer before paying for anything out of your own pocket.
Phony charities: You may want to make a donation in your deceased service member’s name or support a cause that gives back to other military families. Generally, you may want to be suspicious of any charity donation requests that you don’t initiate.
Financial schemes: Processing finances after your loved one’s death and funeral may seem like an overwhelming task. You might have questions about your survivor benefits, how they’ll change over time and how you’ll need to adjust your financial planning. Avoid financial scams by reading the Department of Defense’s “A Survivor’s Guide to Benefits” and access your Online Survivors Benefit Report which can help you understand how your finances will change going forward. Financial counselors can guide you to sound investment opportunities.
Investment schemes: Financial uncertainty can be scary, but take a breath before rushing into an investment. Watch out for organizations that approach you and ask you to invest. Do your research before investing with any company, and check their Better Business Bureau affiliation.
Moving-related scams: Beware of rental and moving scams if you decide to relocate after your service member’s death. In general, be suspicious if the property is much less expensive than a similar one, no one will show the property, you aren’t asked for references, you’re asked for a deposit before seeing the property or you’re asked to wire money for any expense.
Dating scams: If and when you begin to open your heart again, be sure to protect your finances. Look for red flags early in relationships that might warn of a scam, like asking you for a large loan, encouraging you to open joint accounts, asking you to cover bills or expenses other than your own, or questions about your financial state before you’re ready to discuss it.
Take your time making decisions, and don’t be afraid to ask questions to ease your mind. Don’t let scammers take advantage of you – ask for second opinions from loved ones and trusted professionals, especially when you feel most vulnerable.
Support is available to you each step of the way from Military OneSource financial counselors and installation resources, like chaplains, casualty assistance officers or personal financial manager: http://www.militaryonesource.mil/
TAX EXTENSIONS FOR SURVIVORS
The information contained in this article is meant to provide awareness of available benefits for survivors of service members. This article is not meant to be comprehensive and is not intended to replace the consultation of a tax professional.
If you expect tax season to put cash in your pocket, you may be planning to file as soon as possible. But if you’re a survivor of a service member who has died on active duty, you may have the automatic option of taking extra time to file your tax return. The April 15 tax-filing deadline may not apply to you.
The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for 180 days after the later of:
• The last day the service member was in a combat zone, had qualifying service outside of the combat zone or served in a contingency operation (or the last day the area qualifies as a combat zone or the operation qualifies as a contingency operation)
• The last day of any continuous qualified hospitalization for injury from service in the combat zone or contingency operation or while performing qualifying service outside of the combat zone (qualified hospitalization is any ospitalization outside the United States, and up to five years of hospitalization in the United States)
In addition to the 180 days, the filing deadline is extended by the number of days that remained for filing the federal income tax return when the service member qualified for the extension. For example, you generally have from Jan. 1 to April 15 each year to file your federal income tax return. Any days of this period that were left when the service member entered the combat zone — or the entire period if the qualifying service began before Jan. 1 — are added to the 180 days when determining the last day allowed for filing. When the date falls on a Saturday, Sunday or legal holiday, the due date is delayed until the next business day.
Spouses of individuals who served in a combat zone or contingency operation are entitled to the same deadline extensions with two exceptions. The extension does not apply to a spouse for any tax year beginning more than two years after the date that the area ceased to be a combat zone or the operation ceased to be a contingency operation. The extension also does not apply to a spouse for any period the qualifying individual is hospitalized in the United States for injuries incurred in a combat zone or contingency operation.
What the filing extension covers: The actions to which the deadline extension provision applies include:
• Filing any return of income, estate, gift, employment or excise tax
• Paying any income, estate, gift, employment or excise tax
• Filing a petition with the tax court for redetermination of a deficiency, or for review of a tax court decision
• Filing a claim for credit or refund of any tax
• Bringing suit for any claim for credit or refund
• Making a qualified retirement contribution to an IRA
• Allowing a credit or refund of any tax by the IRS
• Assessment of any tax by the IRS
• Giving or making any notice or demand by the IRS for the payment of any tax, or for any liability for any tax
• Collection by the IRS of any tax due
• Bringing suit by the United States for any tax due
If the IRS takes any actions covered by these provisions or sends you a notice of examination before learning that you are entitled to an extension of the deadline, contact your legal assistance office. No penalties or interest will be imposed for failure to file a return or pay taxes during the extension period.
Tax forgiveness: When a service member dies on active duty, the Internal Revenue Service may forgive the amount of federal tax the service member would have paid, as well as refund the tax paid for a period of time prior to the death. For information on what is offered through the Internal Revenue Service and whether you qualify, go to Military OneSource and read “Military Survivor Benefits: Tax Forgiveness.”
Tax help is a call or click away: The loss of a loved one may result in unique questions related to filing your taxes; trained Military OneSource tax consultants are here to help you find the answers. To schedule your no-cost appointment, call 800-342-9647 or find information on tax services online.
Round up your W-2 forms and other paperwork and get ready to take your 2014 taxes off your to-do list. Read more about filing your tax return in the IRS Armed Forces Tax Guide. •
