NOTE: This headliner is current through the publication date. Since changes may have occurred, no guarantees are made concerning the technical accuracy after the publication date.
Headliner Volume 205
June 7, 2007
Civilian taxpayers working with U.S. Armed Forces in combat zones need to contact the IRS about their work status to receive special tax benefits. Benefits include:
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Extensions of time to file tax returns, pay taxes, and claim refunds
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Suspension of audits and collection activities
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Suppression of notices
American Red Cross employees, industrial technicians, federal government specialists, scientists, and accredited correspondents are among the workers who may benefit.
Notification to IRS: Taxpayers, their spouses, or authorized representatives can notify the IRS by:
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Telephone: (800) 829-1040 (within the U. S.)
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Marking the top of tax returns and IRS notices in red with “Combat Zone”.
Put “Combat Zone” on the envelope used to mail back a notice.
The notification should include:
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Name
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Stateside address
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Date of birth
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Date of deployment to the combat zone
Special Tax Benefits. To get benefits, taxpayers need to notify the IRS when they are deployed to a combat zone and when they are no longer serving in a combat zone. The IRS suspends account activity for the period of time the taxpayer is working in the combat zone and for 180 days thereafter.
Deadline extensions apply to income, estate or gift taxes, as well as, employment and excise tax returns of individuals (generally Schedule C filers). Extensions do not apply to corporate income taxes or to employment or excise taxes of an entity, such as an S corporation or limited liability company (LLC), where the owner or main person is in the combat zone. Extensions do not apply to information returns, such as Forms W-2, Wage and Tax Statements.
Taxpayers working in combat zones also have additional time to:
Civilian taxpayers do not qualify for exclusion of income earned while working in a combat zone. At this time, combat zone military pay exclusion applies only to members of the U.S. Armed Forces. However, civilians, who are not federal employees, may qualify for the foreign earned income and foreign housing exclusion and the foreign housing deduction.
U.S. citizens and resident aliens living abroad are taxed on worldwide income, but they may qualify to exclude from income up to $82,400 of foreign earnings. In addition, certain foreign housing amounts may be excluded or deducted. The value of meals and lodging provided by employers may also be excluded from income. Refer to Exclusion of Meals and Lodging in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, Publication 15-B, Employer's Tax Guide to Fringe Benefits, and Publication 593, Tax Highlights for U.S. Citizens and Residents Going Abroad for more information.
Need to know even more? Refer to Questions & Answers on Combat Zone Tax Provisions and Publication 3, Armed Forces Tax Guide.
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