Did you know that members of the military may qualify for tax breaks and benefits? Special rules can lower the tax they owe or give them more time to file and pay taxes. In some circumstances, certain types of military pay are tax-free.

Below are 8 tips to find out who qualifies.

1. Combat Pay Exclusion – Part or even all of someones combat pay is tax-free if they serve in a combat zone, or provide direct support. There are, however, limits for commissioned officers.
2. Deadline Extensions –  Certain members of the military, such as those who serve in a combat zone, can postpone most tax deadlines. Those who qualify can get automatic extensions of time to file and pay their taxes.
3. Special Deductions include:

4. Earned Income Tax Credit or EITC –  If those serving get nontaxable combat pay, they may choose to include it in their taxable income to increase the amount of EITC. That means they could owe less tax and get a larger refund. For tax year 2016, the maximum credit for taxpayers is $6,269. It is best to figure the credit both ways to find out which works best.
5. Signing Joint Returns – Normally, both spouses must sign a joint income tax return. If military service prevents that, one spouse may be able to sign for the other or get a power of attorney.
6. ROTC Allowances –  Some amounts paid to ROTC students in advanced training are not taxable. This applies to allowances for education and subsistence. Active duty ROTC pay is taxable. For instance, pay for summer advanced camp is taxable.
7. Separation and Transition to Civilian Life – If service members leave the military and look for work, they may be able to deduct some job search expenses, including travel, resume and job placement fees. Moving expenses may also qualify for a tax deduction.
8. Tax Help – Keep in mind that most military bases offer free tax preparation and filing assistance during the tax filing season. Some also offer free tax help after the April deadline. Check with the installation’s tax office (if available) or legal office for more information.

The professionals in our office can help you determine if you qualify for one or more of these special rules, call us today.

A new interim guidance, recently issued by The Internal Revenue Service, provides small business owners some relief. According to Notice 2017-23, eligible businesses can take advantage of a new option which enables them to apply part or all of their research credit against their payroll tax liability. This is big news for taxpayers who previously could take only the research credit against their income tax liability.

This new option will be available for the first time to any eligible small business filing its 2016 federal income tax return this tax season as well as to those who have already filed. The new payroll tax credit is especially attractive to eligible startups that have little or no income tax liability. To qualify for the current tax year, a business must:

• have gross receipts of less than $5 million and
• could not have had gross receipts prior to 2012.

An eligible small business with qualifying research expenses has the option to apply up to $250,000 of its research credit against its payroll tax liability. This can be done by filling out Form 6765, Credit for Increasing Research Activities, and attaching it to a timely-filed business income tax return.  Don’t worry if you failed to choose this option and still wish to do so. Under a special rule for the 2016 tax year, eligible small businesses can still make the election by filing an amended return by Dec. 31, 2017.

Further details on how and when to claim the credit or more information on the research credit itself, contact one of our tax professionals today.