CPE Course Overview on Military Income Exclusions
Courses available for completing enrolled agent continuing education requirements every year include details about military income. For many tax professionals, this information is particularly applicable. Working on tax returns for military personnel requires following some special rules.
Basic pay for active duty military service is reported just like any wages. The same tax treatment applies to special pay for such activity as driving duty and aviation incentives.
However, an enrolled agent knows that compensation for active service in a combat zone is excluded from gross income. This exclusion has some limitations for commissioned officers – other than commissioned warrant officers. These are just part of the exceptions addressed in a CPE course for enrolled agents. As top tax professionals, they are careful to assure that any tax-free combat pay is counted as income when determining the Earned Income Credit, the Additional Child Tax Credit, or permissible IRA contributions.
The complexity of military pay is an important reason for using the services of enrolled agents. For example, most military living allowances are not taxable. This includes allowances for basic housing, subsistence, cost-of-living abroad, or overseas housing. Also exempt from tax are family allowances for emergencies, separation, evacuation, and certain dependent education expenses.
Military income may also include tax-exempt death gratuities to survivors, burial services payments, and reimbursement for dependent travel to burial sites. Non-taxable moving allowances include payments for dislocation, moving in, transport of household items, storage, temporary lodging, and military base realignment or closure. Some payments of travel allowances are also excluded from gross income. This includes leave between overseas tours of duty and annual travel rounds for dependent students.
There are a large number of special military income categories that are also excluded from taxable income. Among them are payments for defense counseling, disability, group life insurance, professional education, uniform allowances, retirement protection plan premiums, dependent care assistance, medical care, legal assistance, and commissary discounts.
One of the few things that must be included as taxable income is the value of personal use of a government-provided vehicle. However, travel when space is available on government-sponsored aircraft is tax-exempt.
Inexperienced tax preparers might not possess the full knowledge about military income that is derived from enrolled agent continuing education. Enrolled agents are aware of all the uncommonly known rules. nder. They must continue deducting the remaining points over the life of the new loan.
There’s one other matter where a professional tax preparer helps taxpayers avoid mistakes. That is, points paid by a seller count for the benefit of the buyer. That means the buyer gets a tax deduction for the points, but must subtract the points from the basis in the home.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.