Luckily for Fort Campbell Soldiers, those filing military-related tax returns experience many of the same problems faced by their civilian counterparts. However, Soldiers should keep a few key issues in mind when filing this year.

The biggest difference between military and civilian tax returns is combat zone pay. CZ pay is excluded from a Soldier’s income and does not appear on the Form W-2 as wages earned.

Combat zone pay for enlisted Soldiers, warrant officers and commissioned officers (to a certain amount) is not subject to federal income tax. On the W-2, CZ pay is nontaxable income.

“I’d be very surprised if there were people that didn’t know about that,” Tax Center Coordinator Tom Loebl said.

A new credit this year, the Making Work Pay credit, was implemented in 2009 as part of economic stimulus measures. The credit results from an adjustment in withholding amounts, so employees see an automatic credit in their paychecks as less federal income tax is deducted.

“The biggest thing that is going to affect Fort Campbell is the Making Work Pay credit,” Loebl said. “It [also] affects those who are deployed.”

The temporary credit amounts to $400 for singles or $800 married filers and is equivalent to 6.2 percent of an individual’s earned income. In this case, combat pay can be included in the calculation of the credit. Therefore, even Soldiers who earned CZ pay but not wages for 2009 receive the refund.

Those recently back from deployment, especially the Soldiers of the 159th Combat Aviation Brigade, should keep this in mind while filing this year.

“That’s going to be the big thing for the returning folks,” Loebl said.

Earned income is all taxable income and wages received during the year. The Earned Income Tax credit is meant to benefit those who don’t earn a high income, and many Soldiers can take advantage of it.

Soldiers can choose to include nontaxable combat pay as earned income for the Earned Income Tax credit. According to the IRS Web site, this amount is noted in box 12, code Q, on Form W-2. This applies only to excludable combat pay, not the basic allowance for housing or the basic allowance for subsistence. Including the combat pay may either increase or decrease the amount of Earned Income credit received, depending on the filer’s situation.

One new tax twist this year that is tripping up Soldiers and civilians alike is the First-time Homebuyer’s Tax credit. All filers claiming this credit must mail their returns, rather than submitting the information electronically. While an inconvenience that delays the filer’s refund, Loebl said it’s a measure to prevent fraud.

Soldiers serving outside the U.S. also qualify for an extension on this credit. They have until May 1, 2011 to buy a house.

Deployed Soldiers get extensions for filing taxes. They are given an automatic six-month extension from the date they return from service.

Soldiers should also be prepared with the right documents and information if they want someone else to file taxes for them. Individuals who file for Soldiers should be granted power of attorney status. Soldiers can pick up the required materials (Form 2848) at the Fort Campbell Tax Center or the Legal Assistance Office. The form is also available on the www.irs.gov Web site.

The Sgt. Brett T. Christian Tax Center is available for free use by Soldiers, Family members, retirees and Department of Defense civilians. The IRS-trained volunteers are well-versed in military income tax preparation. Visit their office located at 2699 Kentucky Ave. or call for an appointment at (270) 798-1040.

Since beginning the process of filing 2009 returns Jan. 15, more than 500 people have used the center’s services.

“We’ve had a smooth start,” Loebl said. “ … People are taking advantage of it.”

W-2s should now be released for all employees on the myPay system. To access these documents, visit www.mypay.dfas.mil.

April 15 is the deadline to submit returns.

More common military-specific tax issues are addressed by the IRS at: www.irs.gov/individuals/military/index.html.

Editor’s note: This story is the second in a series about tax preparation assistance available at Fort Campbell.