U.S. troops who served in combat zones during the Persia Gulf war have been extended tax benefits by Congress. Tax relief also has been extended to include the earlier Desert Shield time, dating back to Aug. 2.
The effective date of these special tax provisions begins on the ++ date that an individual arrived in the combat zone or Aug. 2, whichever is later. Although many bills are pending in Congress to grant additional relief to military personnel, here is what already has been enacted:
* *Military pay received by enlisted personnel while serving in the combat zone will be exempt from income tax.
* Military income up to $500 per month received by commissioned officers while serving in the combat zone also will be exempt.
* Interest on income tax refunds will begin to accrue April 15 even if the return is filed later.
* Armed forces and civilian personnel directly supporting military operations have 180 days from the date they leave the combat zone to file income tax returns. And, except for withholding and employment taxes, payment of taxes is deferred.
* No penalties, interest, or additions to tax may be added until the end of the 180-day period.
* Military personnel in combat zones will not have to file income tax returns until 180 days after they leave the region. This extension also applies to their spouses when they file joint returns.
* Actions such as assessing or collecting taxes are not permitted during the time in the combat zone and the 180-day period after the individual leaves. However, under certain circumstances the Internal Revenue Service may still assess and collect taxes under a special provision known as a "jeopardy assessment." That's when prior years' taxes are owed and the IRS believes collection would be difficult.
* In the event military personnel are killed while serving in combat, the tax liability of the decedent for the year of death will be waived and all unpaid taxes for prior years will be forgiven.