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					From:                  Halsey-Munroe, Patricia
Sent:                  Tuesday, February 03, 2004 2:30 PM

Subject:               POW Notice #05-04: MLCP Tax Program for 2003 Tax Returns
               MLCP 2004 Tax Program for Filing 2003 Income Tax Returns
               & Income Tax Information For Military Members & Families
                                                Provided by the
                                     Legal Assistance Branch, MLCPAC (ll)
                                        Bldg. 54C, Coast Guard Island
                                           Alameda, California 94501
                                        (510) 437-2762 (Tax Services)

Free, Electronic Filing on Coast Guard Island for Tax Year 2003: The Legal Assistance Branch,
MLCPAC (ll) will provide free, electronic filing in conjunction with the IRS VITA tax services starting
February 15, 2004. If a VITA Volunteer prepares your return, that volunteer will may give MLCPAC (ll)
your return on disk to e-file for you. Ask your volunteer preparer about this service.

Other Free, Electronic Filing and Tax Preparation Services: At many of their larger offices, the IRS
offers free electronic filing (e-filing) and free, form preparation 6 days a week. To determine which
services are offered at your local IRS office, call 1 (800) 829-1040. In Northern California, both form
preparation and electronic filing are offered at the following IRS offices: Oakland; Sacramento; Santa
Rosa; Chico; Redding; Walnut Creek; and San Francisco.

The IRS has partnered with various private industry companies to bring taxpayers affordable,
convenient, user-friendly, e-file options available from home or through an Authorized IRS E-file
Provider. Some companies offer FREE electronic filing services on-line for active duty, military
taxpayers. For a list of these electronic filing services, check the IRS website at
<>. One electronic filing service is offering free filing to military families -- see
<> .

Many military installations also offer FREE tax services, and you may want to call the military
installation closest to you to determine the nature and extent of their services, including the availability
of e-file.

Electronic filing is not to be confused with the “refund” program offered by commercial tax services
where the taxpayer gets a so called “refund” the “same day” or a couple of days after having the tax
return prepared and electronically filed with the IRS. These same-day refunds are not refunds at all
but are, in fact, loans. These loans often have interest rates of nearly 300% per annum. It rarely
makes sense for a taxpayer to pay a high interest rate to get an immediate refund when an
electronically filed refund can be received in 4 to 7 days.

VITA Volunteers Assist with Tax Form Preparation: Any Coast Guard member or spouse who has
questions or problems completing a 2003 income tax return should contact their local Volunteer
Income Tax Assistance (VITA) volunteer, who is IRS-trained to prepare income tax forms. The VITA
volunteers have charts showing which forms to file, and they can assist with preparation of the 1040EZ
form and the 1040A form. Some VITA volunteers may have more experience and can provided
assistance with the 1040 form. For a referral to you local VITA volunteer, please call the telephone
number noted above and request a faxed copy of the VITA Tax Volunteer list. The list of tax
volunteers is also located on SWS III at Outlook, “All CGIsland” under “Tax Notes.”

Legal Assistance Attorneys Assist with Complex Federal and State Tax Forms: By appointment,
MLCPAC Legal Assistance Attorneys will assist with preparation of complex federal and state income
tax returns. Civilian spouses who work in California and who must file a California income tax return
are encouraged to schedule an appointment for assistance with preparation of their California tax
return. These services are most in demand at the end of March, and you are encouraged to call in
March to guarantee availability of this service. Also these legal assistance services are available only
to clients with a military identification card and who are eligible for legal assistance services under 10
USC 1044a.
Note for California 540NR Returns: Due to the Dec 2003 changes in the federal law under the new
Servicemembers Civil Relief Act (SCRA) at 50 USC Appendix Sec 571 (d) -- it is recommended that
California Non-Resident Income Tax Returns (540NR) not be prepared until after March 1. This will
give the state of California time to enact appropriate legislation conforming to the requirements of the
federal law and will change the requirements for the form.

Questions/Forms/Websites: Taxpayers can call the IRS 24 hours a day, 7 days a week for answers
to federal income tax questions and to order federal income tax forms. The IRS’s telephone number is
1 (800) 829-1040. Federal income tax forms, publications and instruction booklets are also available
on the IRS website at <>. Most state tax authorities also maintain an Internet
website where the taxpayer can obtain state income tax forms and instructions. Taxpayers can access
the state websites from links on the IRS website. Look for “fillable” forms and send the form often
when preparing. Many federal and California income tax forms are also available in building 54C.
Earned Income Credit: More military families rate the Earned Income Credit (EIC) for their income
taxes due to new IRS rules in 2002. Certain entitlements, e.g BAH, subsistence, and combat pay are
no longer included in the AGI for the EIC. For more information see the IRS publication at

Combat Zone Tax Filing Extensions: Taxpayers who are serving in a combat zone on the tax-filing
deadline are automatically granted an extension to file their federal taxes until 180 days after they
leave the zone (not 180 days after they return). Additional extension time may be provided based on
the period of time the taxpayer was in the combat zone. Legal assistance can provide you with the
procedure for filing late under the terms of this automatic extension. NOTE: Some states may require
a separate request for an extension while others honor the automatic federal extension. Contact legal
assistance to understand your state’s requirements.

Expansion Of Combat Zone Filing Rules To Contingency Operations: The extensions discussed
directly above now apply to those who are deployed outside the United States away from their
permanent duty station, and participating in an operation designated by the Secretary of Defense as a
contingency operation. Contact legal assistance to see if this section applies to you.

Military Family Tax Relief Act (MFTRA): The following information was provided by CDR George F.
Reilly, JAGC, USN, and is reprinted with his consent:

1.   Capital Gains Relief for Sale of a Principal Residence:

         a.   Normally, an individual taxpayer can exclude up to $250,000 ($500,000 if married filing a
              joint return) of gain realized on the sale of a principal residence if they owned and used
              the residence as a principal residence for at least two of the five years ending on the date
              of sale.

         b.   Under the MFTRA, a service member may elect to suspend for a maximum of ten years
              the five-year period for ownership and use during certain absences due to their military
              service. This change is retroactive and applies to sales after 6 May 1997. Taxpayers
              have a one-year period (beginning on 11 November 2003) to claim refunds as a result of
              this provision.

         c.   What does this really mean? The bottom line is that any military taxpayer who sold a
              former principal residence since 6 May 1997 (the enactment date of the Taxpayer Relief
              Act of 1997) may, I repeat, MAY be entitled to a tax refund.

2.   Taxation of Death Gratuity and Increase in Amount Payable: The MFTRA increases the
     amount of the death gratuity payable for deaths occurring on active duty from the current $6000
     to $12,000. This provision is retroactive to deaths occurring from 11 September 2001 forward.
     Since the tax was already paid by some of the affected families, they will also have to seek a
     refund from the IRS.

3.   “Above-the-Line Deduction” for National Guard and Reserve Members for Guard/Reserve
   Travel Expenses: Under prior law, Guard and Reserve members could only claim itemized
   deductions for their non-reimbursable expenses for transportation, meals, and lodging when they
   must travel away from home (and stay overnight) to attend meetings or drills. The MFTRA
   provides what is called an “above-the-line deduction” for the overnight transportation, meals, and
   lodging expenses of National Guard and Reserve members who must travel away from home
   more than 100 miles (and stay overnight) to attend Guard and Reserve meetings and drills. This
   means that they can deduct these expenses from gross income whether or not they itemize their
   deductions. This only applies to expenses not exceeding the local per diem rate and is only for
   travel 100 miles or more from home. This provision is retroactive to expenses on or after 1
   January 2003.


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