Veterans Groups Resist IRS Audits

The IRS does a fairly good job taking care of American military families, but what about our veterans?

Some think the IRS is picking on the American Legion and other non-profit veteran organizations.  The American Legion is a veterans organization that was incorporated by Congress in 1919.  They are “the nation’s largest wartime veterans service organization, committed to mentoring youth and sponsorship of wholesome programs in our communities, advocating patriotism and honor, promoting strong national security, and continued devotion to our fellow servicemembers and veterans.”  They are also highly enthusiastic about baseball and that’s good enough for me.

Jerry Moran, a Senator from Kansas, is unhappy about audits that the IRS has undertaken of certain American Legion posts.  Apparently the IRS requires that they maintain dates of service and character of service records for all its members or face $1,000 per day penalties.  American Legion officials are claiming that they have never heard of this requirement.

Really this requirement is not unreasonable, given the fact that it is the IRS’ job to make sure all tax-exempt organizations are meeting the requirements for tax-exempt status.  But veteran groups are claiming that they have never been informed of the record-keeping obligations.  Moran wants to know when this requirement came about, under whose watch, and by what authority.  These are valid questions since the audits are being conducted pursuant to mere IRS “guidelines” found in the Internal Revenue Manual.  Moran is asking the IRS to point to the actual legal authority that grants them the right to conduct these audits and levy tax penalties for non-compliance.

Accounting Today asked about these audits.  The IRS’ response:

  • There is no special enforcement effort underway; just routine compliance activity
  • Authority for these audits is granted by Internal Revenue Code Section 501(c)(19)
  • The IRS HAS made efforts to inform veteran organizations of their obligations by way of outreach programs and special publications, so if they didn’t know, they should have known

Special Tax Benefits for Military Families

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In the good ol’ United States of America, we love our servicemen and women and we try to treat them right.  One way we honor them is by making sure that the Tax Code is chock-full of tax benefits especially for the military.  And it’s not just fluff; these are good, practical benefits that are routinely acknowledged by the IRS.

Here are some popular tax benefits available to active members of the US Armed Forces:

  1. Some unreimbursed moving expenses are deductible in connection with a permanent change of station
  2. Military pay while serving in a combat zone is not taxable
  3. Military personnel get automatic extensions on many IRS deadlines, including the filing of a personal income tax returns, which could also delay collection of back tax debt
  4. The cost and upkeep of uniforms is deductible under certain circumstances
  5. Joint returns don’t need to be filed by both spouses when one is deployed (kind of a lame benefit, but a benefit nonetheless)
  6. Certain unreimbursed travel expenses available to reservists traveling away from home
  7. Subsistence allowances paid to ROTC students participating in advanced training are not taxable
  8. Certain expenses associated with transitioning back to civilian life (i.e., job search) are deductible

See IRS Pub 3 (Armed Forces’ Tax Guide) for more information.

Military: Tips, Benefits, and Incentives

Its always preferrable to obtain tax relief on the front end rather than having to scramble for it after the IRS comes knocking. Today the IRS released another installment in its Summertime Tax Tips series, this time listing some special tax breaks for military personnel that can help them keep their tax bill low. Members of the military enjoy special benefits such as relaxed filing rules and deadlines, exempted combat pay, and deductions for moving and travel expenses. See the full article here.

After looking at this list, you may find yourself wondering what other classes of individuals qualify for special tax relief or benefits. One such group is the elderly. Another is the disabled. There are individual tax guides for each of these groups in case you want to read up:

  • Military: Pub 3
  • Seniors: Pub 554
  • Disabled: Pub 907

The government gives certain tax breaks to the elderly, and the disabled because we believe it is important to show compassion for these classes of individuals. As for the military, we are proud of what they are doing for our country and we want them to be able to focus more on the task at hand to increase the likelihood of success. Perhaps the military tax benefits are more akin to a different class of incentives that are offered to influence certain behaviors. Some of the behaviors that the government seeks to influence through tax incentives are energy efficiency, health, purchasing, education, and adoption. Maybe the tax benefits available to the military also work as an incentive for the youth of our country to join the armed forces. Of course whether or not tax incentives actually affect behavior is debatable.