The IRS and Combat Zones

Like most people, I've done my best to minimize my interactions with the IRS over the years. Imagine my surprise when I had cause to email the IRS and got a positive response in less than an hour!

There are very important tax considerations for everyone serving or working in designated "Combat Zones", generally Iraq, Afghanistan, and some supporting areas. While active duty soldiers get tax exemption for all or most of their pay in combat zones, there are many important things that apply to everyone, so I thought I'd do my best to get the information out.

The biggest, and most important is that all personnel working in a designated combat zone in direct support of US Armed Forces are exempt from any and all deadlines, fees, penalties, and reporting requirements from the date they enter the combat zone until 180 days after they return from the combat zone. This includes active duty personnel, civilians, and contractors working in direct support of US Armed forces.

All you have to do is send an email to the IRS with your basic information and your tax file will be marked with the "Combat Zone" exclusion. All it takes is a simple email!

Important information regarding this (links to irs.gov):

Notifying the IRS by E-Mail about Combat Zone Service

Tax Information for Members of the U.S. Armed Forces

Contract Workers in Combat Zones – Do You Know the Rules?

From Publication 17 (2006), Your Federal Income Tax:

Individuals Serving in Combat Zone

The deadline for filing your tax return, paying any tax you may owe, and filing a claim for refund is automatically extended if you serve in a combat zone. This applies to members of the Armed Forces, as well as merchant marines serving aboard vessels under the operational control of the Department of Defense, Red Cross personnel, accredited correspondents, and civilians under the direction of the Armed Forces in support of the Armed Forces.
Combat zone.

For purposes of the automatic extension, the term “combat zone” includes the following areas:

1. The Persian Gulf area, effective January 17, 1991.
   
2. The qualified hazardous duty area of Bosnia and Herzegovina, Croatia, and Macedonia, effective November 21, 1995.
   
3. The qualified hazardous duty area of the Federal Republic of Yugoslavia (Serbia/Montenegro), Albania, the Adriatic Sea, and the Ionian Sea north of the 39th parallel, effective March 24, 1999.
   
4. Afghanistan, effective September 19, 2001.
   

See Publication 3, Armed Forces' Tax Guide, for information about other tax benefits available to military personnel serving in a combat zone.

Extension period

The deadline for filing your return, paying any tax due, and filing a claim for refund is extended for at least 180 days after the later of:

1. The last day you are in a combat zone or the last day the area qualifies as a combat zone, or
2. The last day of any continuous qualified hospitalization for injury from service in the combat zone.

In addition to the 180 days, your deadline is also extended by the number of days you had left to take action with the IRS when you entered the combat zone. For example, you have 3½ months (January 1-April 15) to file your tax return. Any days left in this period when you entered the combat zone (or the entire 3½ months if you entered it before the beginning of the year) are added to the 180 days. See Extension of Deadline in Publication 3 for more information.