What will the income tax return (2007) be like for a active duty service member ?

Question

Paygrade is a E-4
Has wife and 4 kids
Deployed to Iraq 7 months out of 2007
Estimated income for yr is 7058 and taxes paid are 900

Answer 1

It should be about the same as last year. Count of a big refund with Earned Income Credit

Answer 2

You need to consult IRS pub 3 Tax guide for the Armed Services.

As a general rule anything listed on your LES that has pay in the name is included on your W-2 and is taxable. Anything that has the name allowance in the name is non taxable and won’t show up on your W-2. Amounts you earn while in a combat zone aren’t subject to income taxes but are subject to social security taxes.

If the only income your family receives is your military pay (assumes $7,058 is the money you will receive the rest of the year) here is what you income tax return should look like.

Assumptions
7058/5= 1411 Per Month
1411*7= 9877 Combat zone exclusion
16935 Total Income for Year
7058 Adjusted Gross Income
0 Taxable Income
0 Tax

$900 Amount Withheld
$4091 Earned Income Credit
$845 Additional Child Tax Credit
$5836 Refund

Many military institutions have VITA (volunteer income tax assistance) sites where you can get your return prepared for free. I was a VITA volunteer many years ago when I was in the Army. You can also get free tax help at your closest IRS office or if you are computer literate try free file at IRS.gov.

On a personal note I would like to thank you for the sacrifices you and your family have make for our country

Answer 3

On $7058 income (which I assume excludes the combat pay) you wouldn't have any income tax liability for the year, so you'd get your $900 back. You'd also get an earned income credit, and for calcuiation of EIC you can include your combat pay if it benefits you, which it sounds like it would. If the $7058 was your pay for the five months you weren't deployed, I'm guessing that your total income for the whole 12 months was around $17,000 - if that's true, your EIC would be around $4500, so added to the $900, your refund should be close to $5400.

Good luck, and thanks for being there helping protect the rest of us.

Answer 4

Any of your pay that is classified as Combat Pay (which will show on your W-2 Box 12 with code Q) is tax-free. However you may use your combat pay to figure your Earned Income Credit if it is to your advantage.

You will always use your combat pay to figure your Child Tax Credit. I believe your $7,058 is your noncombat pay.

Count on a refund, you will owe no federal income tax. Since I don't know how much combat pay you received, I can't say how much your refund will be.