Tax Returns for Military Personnel
If your practice includes preparing tax returns for military personnel, here are a few reminders about some special benefits that may be available to them.
Minimum Franchise or Limited Liability Company (LLC) Annual Tax Exemption
A corporation or LLC that is a small business solely owned by a deployed member of the U.S. Armed Forces shall not be subject to the minimum franchise or annual tax respectively if the owner is deployed during the taxable year and the corporation or LLC operates at a loss or ceases operation.
Corporations or LLCs exempt from the minimum franchise or annual tax should write “Deployed Military” in red ink in the top margin of the corporation’s or LLC’s tax return.
Filing Due Dates and Time Extensions
Military members and Merchant Marines who are outside the United States or who are in a combat zone, contingency operation, qualified hazardous duty area, or qualified hospitalization qualify for automatic extensions for:
- Filing returns (except income withheld at source).
- Paying taxes (except income withheld at source).
- Filing protests.
- Claiming refunds or credits.
- Filing appeals.
Reservists Travel Expenses
National Guardsmen and Armed Forces reservists who travel 100 miles away from home and stay overnight to attend National Guard and reserve meetings are allowed to take an above-the-line deduction for unreimbursed travel expenses such as transportation, meals, and lodging.
Nonrefundable Child and Dependent Care Expenses Credit (CDC)
Military personnel domiciled outside of California may use the adjusted gross income (AGI) less military pay (or, modified AGI) to compute the CDC. If you do so, write “MPA” to the left of the credit amount on form FTB 3506, Child and Dependent Care Expenses Credit, line 12 or include it according to your software’s instructions. Please note, however, that if using the modified AGI to determine the applicable decimal amounts used to compute the CDC credit, our filing system will automatically generate a “Return Information Notice (RIN)” when either an electronic or paper filed return is processed. Due to the way our system is set up, the system will attempt to “correct” the percentages on FTB 3506to reflect the federal AGI amount reported on the income tax return, not the modified federal AGI amount. As directed in the RIN, you will need to contact us directly to resolve this issue at 916.845.7057.
If your practice does not include preparing tax returns for military personnel, please let military members and their spouses know that they may be eligible to receive free tax return preparation assistance. The IRS, U.S. Armed Forces, and us participate in the Volunteer Income Tax Assistance (VITA) program which provides free tax advice, tax preparation, tax or information return filing, and other tax assistance to military members and their families.
Volunteers at military-based VITA sites are trained to address military-specific tax issues, such as combat zone tax benefits and the new federal Earned Income Tax Credit guidelines.Military VITA locations are available at the Legal Assistance Office at a military installation, or through the Armed Forces Legal Assistance Legal Services Locator.