Military Tax Protections
January 20, 2016
Active duty U.S. military service members and their families are entitled to some additional protections during tax season under the Servicemembers Civil Relief Act (SCRA).
A service member’s property cannot be seized or sold to pay off unpaid, back taxes that come due and remain unpaid before or during a period of military service, except by court order. The government entity will notify the service member in writing before the potential seizure of property.
A court order allowing the sale of the service member’s property will only be issued if the court finds that the service member’s military service does not materially affect his or her ability to pay the unpaid tax. A court may stay proceedings to enforce the collection of a tax for the sale of property that runs for the duration of the service member’s military service and up to 180 days after his or her release from military service.
Arkansas Attorney General Leslie Rutledge issued today’s consumer alert to educate military families across Arkansas about this safeguard when they are facing the insecurity of deployment or active duty as tax season approaches.
“The brave men and women who fight for our freedoms deserve special consideration, especially while on active duty,” said Attorney General Rutledge. “Military service can cause financial and emotional stress on families, but the Servicemembers Civil Relief Act was enacted to provide some relief. It is important that we all remember their sacrifices and do what we can to help these heroic families.”
Attorney General Rutledge released information on the additional SCRA tax provisions below to remind active-duty military service members and their families of protections available to them this tax season:
- State tax relief: The SCRA provides that a nonresident soldier's military income and personal property are not subject to State taxation if the soldier is present in the State only due to military orders. For example, if your State of legal residence is Arkansas and the military sends you to Colorado, you will not have to pay Colorado’s State income tax on military earnings. However, income taxes may be charged on any non-military income earned.
- Tax rates: The SCRA prevents states from using the income earned by a service member in determining a spouse’s tax rate when they do not maintain their permanent legal residence in that State.
- Military spouses residency relief: This provision to the SCRA has been added to extend similar tax protections to military spouses who meet certain qualifying factors such as accompanying the service member to a duty station State to comply with military orders. The spouse must also be in the duty station State solely to be with the service member, and the spouse’s home State is the same as the service member. If these requirements are met, the income earned by the non-military spouse while in the duty station State is not subject to taxation in that State.
- Tax deferment: If a service member’s inability to pay their taxes was caused by their military service, service members can defer owed taxes for up to 180 days after release from service.
The IRS provides a Volunteer Income Tax Assistance program, which offers free tax help to military service members. Contact the nearest Armed Forces Legal Assistance Program office if you suspect SCRA rights were violated.
Arkansas military service members, veterans and families should file consumer complaints with the Attorney General’s office on ArkansasAG.gov or by calling (800) 482-8982.