Tax Assistance Center officer goes above, beyond, earns service member $100K tax refund
January 31, 2013
Fort Huachuca, AZ. - A captain stationed here and 2012 officer-in-charge, or OIC, of the Fort Huachuca Tax Assistance Center, or TAC, received a medal this week for gaining a service member a large sum of money from the Internal Revenue Service, or IRS.
Capt. Kyle Dietrich, trial counsel, Office of the Staff Judge Advocate, received an Army Achievement Medal, or AAM, from Col. Dan McFarland, Fort Huachuca garrison commander, on Monday during the opening ceremony of the Fort Huachuca TAC.
In 2012, Dietrich represented a service member whose house was wrongfully foreclosed on by the individual's mortgage lender in 2009. According to Everett Maynard, Jr. attorney at law, who nominated Dietrich for the award, the mortgage lender failed to obtain a court order to seize the house, as required by the Servicemembers Civil Relief Act, while the service member was deployed. In response, a settlement was paid in the amount of $350,000 to the service member, along with a Form 1099-MISC.
The service member had his taxes correctly filed by a commercial tax service, and because the settlement was filed with a Form 1099-MISC, it as designated as a monetary gift and was counted as taxable income. He was then obligated to pay federal and state income taxes of approximately $100,000 on the settlement amount.
After coming to the TAC for an unrelated tax issue, the service member inquired about the income taxes that he had to pay on the settlement. Dietrich examined the details and found that the mortgage lender should not have filed the settlement payment as taxable income via the Form 1099-MISC, but should have filed it as capital gain to the service member.
After contacting the legal representative for the mortgage lender, and many attempts to convince them that the settlement was not taxable, the lender's legal representative maintained the position that the settlement payment was correctly filed.
Dietrich contacted an IRS, tax law advisor and inquired about the wrongful classification of the settlement. After research was conducted in the case, the advisor agreed that the settlement funds were not taxable. Dietrich was instructed to have the service member submit an amendment to the previous tax return and specify the funds as a capital gain. Once this was completed, the service member was then refunded the $100,000 that he had previously paid for the federal and state income taxes.
According to a staff judge advocate on Fort Huachuca, the effort Dietrich put forth involved a great deal of persistence in dealing with the IRS and the mortgage lender. It also demonstrated the added value that the tax center and the legal assistance office offer to service members. The 10personnel who work at the tax center have been volunteered by their commands to assist for four months, and they have already completed almost an entire month's worth of training. They are highly motivated and working hard.
"I was just happy that I could help … the real credit goes to the people that I worked with at the tax center," Dietrich said. "I knew that the day-to-day operations, they could handle and there was nothing really for me to do … so I didn't have to worry about whether or not we were getting taxes prepared in a timely manner. It's a real testament to them and the job that they did."
After McFarland presented Dietrich with the AAM, Col. Timothy Cody, staff judge advocate, Fort Huachuca, said, "Captain Dietrich's efforts are a great example of Soldiers at Fort Huachuca doing great things for Soldiers."
When talking with the mortgage lender's legal representative, Dietrich found out that more than 180 service members had received a foreclosure settlement from the same company. There may be other service members who could be in this same situation. Those with questions should contact the Fort Huachuca TAC, 533.1040 or 533.1080.