“Dine & Dial” Financial Conference Call
Moderated by Survivor Outreach Services Financial Counselors Wednesday Jan 16, 2013, 7 PM (Eastern) (6 PM Central)
(1-218-936-4141 access code 7681905)
The concept of Dine and Dial is to take advantage of a convenient way to share information with Survivors who may not have a easy face-to-face access to a nearby Survivor Outreach Financial Counselor, as well as those who simply would like to hear what some of the potential issues and solutions are regarding issues potentially impacting them.
The next Dine and Dial Conference call is 6 PM Central is Jan 16, 2013. The Dine and Dial calls are an opportunity for Survivors to hear a brief presentation on the featured topic, followed by an open dialog. The featured topic for January is “Tax Issues and Opportunities Facing Survivors” and will be a special opportunity for Survivors to speak to a panel that have worked with Survivors on tax issues and opportunities.
With many positive changes over the last years it will be a great call for Survivors to be able to ask questions and also acquaint themselves on ways to optimize their use of some of the features and provisions of the tax code. If you wish to dial in and listen or participate in the 1 hour call, simple let your Survivor Outreach Services Coordinator know so if there are any handouts, they can be emailed to you and also we can gage the amount of callers planning to be on the call.
Mark J. Dunlop, MSFS,CEBS®,CFP®,ChFC®,AFC®,AEP®,RFC®,CITRMS®
Ft. Leonard Wood, Missouri
Excerpts of Key Tax Publications and Acts
Pub 3 Armed Forces' Tax Guide
Forgiveness of Decedent's Tax Liability
Tax liability can be forgiven, or if already paid, refunded, if a member of the U.S. Armed Forces dies:
· While in active service in a combat zone,
· From wounds, disease, or other injury received in a combat zone, or
· From wounds or injury incurred in a terrorist or military action.
Tax for the year of death and possibly for earlier years can be forgiven.
In addition, any unpaid tax liability at the date of death may be forgiven. Any tax liability that is forgiven does not have to be paid.
If a member of the Armed Forces dies, a surviving spouse or personal representative handles duties such as filing any tax returns and claims for refund of withheld or estimated tax. A personal representative can be an executor, administrator, or anyone who is in charge of the decedent's assets.
Joint returns. Only the decedent's part of the joint income tax liability is eligible for the refund or tax forgiveness. To determine the decedent's part, the person filing the claim must:
1. Figure the income tax for which the decedent would have been liable if a separate return had been filed,
2. Figure the income tax for which the spouse would have been liable if a separate return had been filed, and
3. Multiply the joint tax liability by a fraction. The top number of the fraction is the amount in (1), above. The bottom number of the fraction is the total of (1) and (2).
The amount in (3) is the decedent's tax liability that is eligible for the refund or tax forgiveness. If you are unable to complete this process, you should attach a statement of all income and deductions, indicating the part that belongs to each spouse. The IRS will determine the amount eligible for forgiveness.
Residents of community property states. If the decedent's legal residence was in a community property state and the spouse reported half the military pay on a separate return, the spouse can get a refund of taxes paid on his or her share of the pay for the years involved. The forgiveness of unpaid tax on the military pay also would apply to the half owed by the spouse for the years involved.
Combat Zone Related Forgiveness
Tax liability is forgiven for an individual who:
· Is a member of the U.S. Armed Forces at death, and
· Dies while in active service in a combat zone, or at any place from wounds, disease, or injury incurred while in active service in a combat zone.
The forgiveness applies to:
· The tax year death occurred, and
· Any earlier tax year ending on or after the first day the member served in a combat zone in active service.
In addition, any unpaid taxes for years ending before the member began service in a combat zone will be forgiven and any of those taxes that are paid after the date of death will be refunded.
The beneficiary or trustee of the estate of a deceased service member does not have to pay tax on any amount received that would have been included (had the service member not died) in the deceased member's gross income for the year of death.
Service outside combat zone. These rules also apply to a member of the Armed Forces serving outside the combat zone if the service:
· Was in direct support of military operations in the zone, and
· Qualified the member for special military pay for duty subject to hostile fire or imminent danger.
For a description of combat zone, see Combat Zone , earlier, under Combat Zone Exclusion.
Missing status. The date of death for a member of the Armed Forces who was in a missing status (missing in action or prisoner of war) is the date his or her name is removed from missing status for military pay purposes. This is true even if death actually occurred earlier.
Terrorist or Military Action Related Forgiveness
Tax liability is forgiven for an individual who:
· Is a member of the U.S. Armed Forces at death, and
· Dies from wounds or injury incurred while a member of the U.S. Armed Forces in a terrorist or military action.
The forgiveness applies to:
· The tax year death occurred, and
· Any earlier tax year in the period beginning with the year before the year in which the wounds or injury occurred.
A terrorist or military action is any terrorist activity primarily directed against the United States or its allies or any military action involving the U.S. Armed Forces and resulting from violence or aggression against the United States or its allies.
Any multinational force in which the United States participates is considered an ally of the United States.
The beneficiary or trustee of the estate of a deceased service member does not have to pay tax on any amount received that would have been included (had the service member not died) in the deceased member's gross income for the year of death.
Army Private John Kane died in 2012 of wounds incurred in a terrorist attack in 2011. His income tax liability is forgiven for all tax years from 2010 through 2012.
Claims for Tax Forgiveness
Returns reflecting forgiven tax and claims for refund of forgiven tax that has already been paid must be identified. Usually, Form 1040X is used to claim the refund.
How to Claim Forgiveness or Refund
If the decedent's tax liability is forgiven, the personal representative should take the following steps.
· File Form 1040 if a tax return has not been filed for the tax year. Form W-2 must accompany the return.
· File Form 1040X if a tax return has been filed. A separate Form 1040X must be filed for each year in question.
· Properly identify the return as explained next.
All returns and claims must be identified by writing “Iraqi Freedom—KIA,” “Enduring Freedom—KIA,” “Kosovo Operation—KIA,” “Desert Storm—KIA,” or “Former Yugoslavia—KIA” in bold letters on the top of page 1 of the return or claim. On Forms 1040 and 1040X, the phrase “Iraqi Freedom—KIA,” “Enduring Freedom—KIA,” “Kosovo Operation—KIA,” “Desert Storm—KIA,” or “Former Yugoslavia—KIA” must be written on the line for total tax. If the individual was killed in a terrorist action, write “KITA” on the front of the return and on the line for total tax.
An attachment that includes a computation of the decedent's tax liability before any amount is forgiven and the amount that is to be forgiven should accompany any return or claim. For joint returns, see Joint returns , earlier.
Necessary documents. The following documents must accompany all returns and claims for refund.
· Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer, and
· A certification from the Department of Defense or the Department of State.
For military and civilian employees of the Department of Defense, certification must be made by the Department on DD Form 1300, Report Of Casualty. For civilian employees of all other agencies, certification must be a letter signed by the Director General of the Foreign Service, Department of State, or his or her delegate. The certification must include the deceased individual's name and social security number, the date of injury, the date of death, and a statement that the individual died as the result of a terrorist or military action. If the individual died as a result of a terrorist or military action outside the United States, the statement also must include the fact that the individual was a U.S. employee at the date of injury and at the date of death.
If the certification has been received but there is not enough tax information to file a timely claim for refund, file Form 1040X with Form 1310. Include a statement saying that an amended claim will be filed as soon as the necessary tax information is available.
Deadline for Filing Claim
If the tax-forgiveness rules apply to a prior year's tax that has been paid and the period for filing a refund claim has not ended, the tax will be refunded. If any tax is still due, it will be canceled. Generally, the period for filing a refund claim is 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later. Returns filed before they are due are considered filed on the due date, usually April 15.
If death occurred in a combat zone or from wounds, disease, or injury incurred in a combat zone, the deadline for filing a claim for credit or refund is extended using the rules discussed later under Extension of Deadlines.
Where to File Return or Claim for Refund
These returns and claims must be filed at the following address.
Internal Revenue Service
333 W. Pershing, Stop 6503, P5
Kansas City, MO 64108
Inside the United States. You can receive an automatic 6-month extension to file your return if you either file Form 4868 by the regular due date of your return or pay any part of your expected tax due by credit or debit card. You can file Form 4868 electronically or on paper. See Form 4868 for details.
The extension of time to file is automatic, and you will not receive any notice of approval. However, your request for an extension will be denied if it is not made timely. The IRS will inform you of the denial.
.JPG)
