GRAFENWOEHR, Germany - This past tax season, 7th Army JMTC tax centers in Bavaria assisted 8,157 tax payers, saving them $1,827,786 in commercial tax preparation fees, and generating $20,732,552 in refunds. Although the overseas tax filing deadline of June 15 has passed, eligible members of the military community may continue to receive limited tax assistance at their local legal assistance office through Sept. 31, 2010.
This extended service is especially important for U.S. citizens living abroad and receiving income from foreign sources; for example, a retiree who now works for a non-DoD firm on the economy.
This is because the IRS requires U.S. citizens to report all worldwide income. So, U.S. citizens must continue to file income tax returns, even if they live overseas and only receive income from foreign sources.
Filing and reporting does not necessarily mean taxes will be owed. There is an income exclusion and a foreign tax credit that can be used to prevent double taxation on foreign income. The foreign earned income exclusion allows taxpayers to deduct foreign-earned income from their total income.
In 2009, taxpayers were allowed to exclude up to $91,400. DoD and DA civilian employees cannot take advantage of this exclusion, because U.S. government employees do not qualify for the foreign earned income exclusion. If taxpayers have foreign income not eligible for the foreign earned income exclusion, but the income in question was subjected to foreign taxation, they may be able to take a credit for foreign taxes paid.
The IRS requires that taxpayers file the past six yearAca,!a,,cs tax returns, but has a 10-year statute of limitations on collecting back tax.
The IRS also may charge penalties and interest on tax owed. These penalties and interest may add up to more than your original tax bill.
Therefore, taxpayers should file missed or prior year tax returns as soon as possible to avoid these extra charges.
There are some special rules to consider when filing late returns that include overseas income. For example, the foreign earned income exclusion normally can only be taken on a return filed by the due date, but late taxpayers can still use the exclusion on returns filed after the due date if they owe no federal income tax after taking the exclusion or, if tax is owed after taking the exclusion, the taxpayer files before the IRS discovers the late exclusion.
One other important note, taxpayers can only receive refunds for returns that were filed within three years of the due date, including extensions. Bottom line, whether taxpayers owe taxes or are due refunds, it is clearly better to take care of the problem before the IRS discovers it.
For assistance with questions about preparing or filing late tax returns, or any other general legal questions, contact your local legal assistance office at the following numbers: Ansbach (Katterbach), 467-2103; Ansbach (Illesheim), 467-4576; Bamberg, 469-8832; Grafenwoehr, 475-7114; Hohenfels, 466-2401; Schweinfurt, 353-8384; and Vilseck, 476-2289.
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