Claims For Tax Forgiveness By Military Members
There are certain situations in which members of the U.S. Armed Services can file claims for tax forgiveness. However, there are restrictions to when and how these claims can be filed. Find specific information below.
If the tax-forgiveness provisions apply to a prior year’s tax that has been paid and the period for filing a refund claim has not ended, the tax will be refunded. If any tax is still due, it will be cancelled. Generally, the period for filing a claim for credit or refund of income tax is 3 years from the time the return was filed, or 2 years from the time the tax was paid, whichever is later. If death occurred in a combat zone, or from wounds, disease, or injury incurred in a combat zone, the deadline for filing a claim for credit or refund is extended. See "Combat Zone Extension".
Procedures For Claiming Forgiveness
All returns and refund claims claiming the tax benefits under Code Sec. 692(c) should be identified by writing the applicable designation provided in IRS Publication 3 (or in other IRS guidance) in bold letters on the top of page one of the return or refund claim and on the total tax line. If the death occurs in the U.S. special procedures apply; See Rev Proc 2004-26.
Attachments
All returns and claims for refund related to tax forgiveness must be paper-filed and include the following attachments:
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Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer, if required, and
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The death certificate from the proper agency (see IRS Pub 3 for details), and
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An attachment that includes a computation of the decedent’s tax liability before any amount is forgiven and the amount that is to be forgiven, and
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A certification from the Department of Defense or the Department of State. For military and civilian employees of the Department of Defense, the Department must make certification on Form DOD 1300. The certification must include the deceased individual’s name and social security number, the date of injury, the date of death, and a statement that the individual died in a combat zone or from a terroristic or military action.
Where to File
Internal Revenue Service, 333 W. Pershing, Stop 6503, P5, Kansas City, MO 64108 (per 2021 IRS Pub. 3)
Spousal Allocation - Joint Returns
Only the decedent’s part of the joint income tax liability is eligible for the refund or tax forgiveness. To determine the decedent’s part, the person filing the claim must:
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Figure the income tax for which the decedent would have been liable as if a separate return had been filed
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Figure the income tax for which the spouse would have been liable as if a separate return had been filed, and
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Multiply the joint tax liability by a fraction. The top number of the fraction is the amount in (1) above. The bottom number of the fraction is the total of (1) and (2).
The amount determined in (3) is the decedent’s tax liability that is eligible for the refund or tax forgiveness. If you are unable to complete this process, you should attach a statement of all income and deductions, indicating the part that belongs to each spouse. The IRS will make the proper allocation.
Residents of Community Property States
If the member of the Armed Forces was domiciled in a community property state and the spouse reported half the military pay on a separate return, the spouse can get a refund of taxes paid on his or her share of the pay for the years involved. The forgiveness of unpaid tax on the military pay would also apply to the half owed by the spouse for the years involved.