By CAPT. JOHN R. MCGUIRE IIIMarch 5, 2014
FORT BENNING, Ga., (March 5, 2014) -- With the tax season fully underway, the Fort Benning Tax Center has already completed nearly 2,000 state and federal returns and obtained almost $3,000,000 in refunds for its clients. Unfortunately, we have also seen our fair share of Soldiers who come in because they are concerned about the work of an off-post paid tax preparer. Here are some of the fraudulent or questionable fact scenarios we've seen:
• Filing single as a married individual when spouse is U.S. citizen
An off-post preparer told the Soldier and his spouse to file separately but not even married filing separately. He had the husband filing "Single," and the spouse filing "Head of Household." He had the Soldier using all of the itemized deductions -$18,000, which was wrong and too high for what he had. And then, had the spouse claim the kids to receive $3800 of Earned Income Tax Credit. Had the couple filed correctly and legally, they would have made too much money to receive the EIC.
The paid preparer assured the Soldier and his spouse military couples "do this all the time." He then told the spouse, "Let me know when your refund hits, then I will file your husband's return."
The preparer was altering the filing status in order for them to have income qualify for EIC. This is known as EIC fraud, and the IRS is really cracking down this year.
• Married couple each splitting dependents and filing Head of Household for both
The only way to be married and file Head of Household is if:
• you and your spouse have been separated and not living in the same household for the last six months (continuously) of the year, and
• you have a qualifying child or relative and certain other requirements are met. Obviously, if you didn't earn enough money to support you and your child, you most likely don't qualify for HoH. For instance, if you're trying to file HoH with one dependent and have income of only $3,000, the IRS is not going to believe you were able to support you and the child; in other words, someone else can and should claim the dependent. Thus, you don't have a qualifying child or relative, so you cannot file HoH.
Keep in mind, temporary absences due to such things as deployment do not qualify someone to meet the "lived apart for six months consecutively."
Oftentimes, like the example above, paid preparers are doing these tricks with the filing status in order to reduce the amount of income the individual has so he or she can qualify for the Earned Income Credit.
• Certain things military expenses paid preparers continue to get wrong:
Uniforms: Individuals come in and say they had their taxes prepared by a paid preparer, and the paid preparer allowed them to deduct all sorts of uniform expenses for ASUs, tailoring, dry cleaning, field equipment, etc. The actual rule is besides rank and insignia, you are not allowed a tax deduction for any uniform or equipment unless the regulations specifically state you are not authorized to wear the uniform off post. We are allowed to wear our ASUs and ACUs at Chipotle, McDonalds, etc., so we are not allowed the deduction. One of the few examples where this deduction is appropriate: Marine Corps duty uniforms. If they live off post, they must wear civilian attire onto post and change into their uniform for the day, and then they must change out of the uniform back into civilian attire if or when they leave post for the night.
What is most likely going on is the paid preparer is accepting all of these receipts and putting them into a Schedule A to make you feel happy and good about these "deductions." However, if you do not have more itemized deductions than the standard deduction amount ($6,100 for Single this year and $12,200 for Married Filing Jointly), then they are preparing a Schedule A for you, not using it, and then charging you to do this. The fee for preparing this for taxpayers is usually quite substantial on the outside, and most will still charge you for this even if it doesn't end up getting used.
Deducting Mileage: The simple rule - you cannot deduct commuting miles. Therefore, you cannot deduct miles driven from home to work and back home. Special rule for military - you cannot deduct miles from Point A to Point B if both are located on the same military post. In other words, you cannot deduct the miles from your office to the range. You can, however, deduct miles if you are not reimbursed and you drive your POV to a duty location off post. For instance, an individual stationed at Fort Benning would be able to deduct mileage if the Soldier was required to drive up to Dahlonega, Ga., as part of his military duties.
You must keep complete and accurate records of all miles driven and the dates of which it was driven.
• Making up itemized deductions and unreimbursed business expenses you never really had
We have seen two individuals come in because they had a bad feeling about how high the amount of itemized deductions the preparer had them deduct. In each case, the itemized deductions totaled over $25,000, of which roughly $11,000 was legitimate. Please ensure you ask questions and double check the preparers work. If you see large subtractions or deductions, especially if it is in the $20,000 - $30,000 range, that should raise a red flag. This is your tax return, so you should feel free to ask questions and ask for explanations.
• Not reporting all of your income
The government wants to tax you on all of your income from "whatever source derived." This means if you received $250 mowing lawns or $300 gambling, the IRS wants to tax you on this. Many people falsely believe it isn't taxable unless you get a tax document, such as a W-2, 1098 or 1099. This is not the case.
Worse yet, we had an individual come in who was receiving a certain amount back. Then, he reluctantly gave our tax preparer an additional W-2, which made his refund go down. He said, "Give me that back. I don't want you to put that in." He informed us that the paid preparer he went to last year didn't make him include it. This is WRONG.
Once you present income, the tax preparer has an obligation to report it. Everyone should be aware that any type of tax document, especially a W-2, has at least three copies released. One copy goes to you, one is retained for their records, and one copy goes directly to the IRS. If what they have from the banking, employer, financial institution or education institution for you does not match what you report to them, you will most likely get a letter from the IRS.
• Guantanamo is not an Authorized Combat Zone to exclude military pay
An NCO came in and was concerned about a paid preparer who was telling his Soldiers the pay they earned while stationed at Guantanamo Bay, Cuba, was excluded as combat pay. This is false. Guantanamo is not a combat zone, and it does not entitle Soldiers to exclude their income while stationed there. If your pay was excludable due to being stationed in a combat zone, in box 12 of your W-2 there would be a Q code. Next to the Q code, there would the amount of your income excluded as a result of being stationed in a combat zone.
If you or anyone you know experiences anything similar to the above-mentioned scenarios, or you just have a bad feeling, trust your instincts and stop the preparer. We urge you to seek advice at the Fort Benning Tax Center. So far, we have been able to make appointments with individuals seeking assistance due to these problems, we have properly reported the incidents to the IRS, and we are currently working to have certain establishments that continue to intentionally and knowingly jeopardize our Soldiers and retirees put on the "off-limits establishments" list.
The Fort Benning Tax Center will file federal and state returns for the 2014 season until the April 15 deadline. All returns are prepared and e-filed at no charge by individuals certified by the IRS. The Tax Center is open Monday, Tuesday, Thursday and Friday from 9 a.m. to 4 p.m., Wednesday noon to 7 p.m., and every other Saturday beginning Feb. 8 from 9 a.m. to 1 p.m.