Pentagon Gouge: Taxes

It's that time of year again, so I'll redirect you to my post last year praising the Volunteer Income Tax Assistance (VITA) program. This message from the Director of the Navy Staff talks about the benefits of the program and offers some statistics of what was done during last year's tax season.

R 151615Z DEC 09
FM CNO WASHINGTON DC//DNS//
TO NAVADMIN
INFO CNO WASHINGTON DC//DNS//
BT
UNCLAS
NAVADMIN 362/09
MSGID/GENADMIN/CNO WASHINGTON DC/DNS/DEC//
SUBJ/2010 VOLUNTEER INCOME TAX ASSISTANCE (VITA)
/ELECTRONIC TAX FILING (ELF) POLICY AND PROGRAM GUIDANCE//
REF/A/MSG/CNO/241821Z NOV 08//
AMPN/REF A IS NAVADMIN 334/08//
RMKS/1. THIS NAVADMIN PROVIDES VOLUNTEER INCOME TAX ASSISTANCE (VITA)/ELECTRONIC TAX FILING (ELF) POLICY AND PROGRAM GUIDANCE. THIS MSG SUPERSEDES REF A.
2. DURING 2009, VOLUNTEERS WITH THE VITA/ELF PROGRAM FILED MORE THAN 63,000 FEDERAL AND STATE TAX RETURNS, SAVING SERVICE MEMBERS AND FAMILY MEMBERS MORE THAN $7 MILLION IN COMMERCIAL TAX PREPARATION FEES, AND PROVIDING OVER $94
MILLION IN FEDERAL INCOME TAX REFUNDS. BASED ON THE SUCCESS OF VITA/ELF IN PAST YEARS, WE WILL ONCE AGAIN IMPLEMENT THE PROGRAM FOR 2010.
3. THE VITA/ELF PROGRAM IMPROVES BOTH MORALE AND READINESS BY SIGNIFICANTLY REDUCING THE EFFORT AND COST INVOLVED IN MEETING FEDERAL AND STATE TAX OBLIGATIONS.
A. VITA KEEPS MONEY IN SAILOR'S POCKETS. COMMERCIAL TAX PREPARERS MAY CHARGE OVER $150 FOR THE AVERAGE ELECTRONICALLY FILED RETURN. VITA/ELF VOLUNTEERS PREPARE AND FILE TAX RETURNS AT NO COST TO SAILORS AND THEIR FAMILIES.
B. FASTER REFUNDS. PAPER RETURNS MAY TAKE EIGHT OR MORE WEEKS TO PROCESS IN THE CONTINENTAL UNITED STATES, AND EVEN LONGER IF SUBMITTED OVERSEAS OR WHILE DEPLOYED. BY USING VITA/ELF, REFUNDS ARE DEPOSITED DIRECTLY INTO A SAILOR'S BANK ACCOUNT AN AVERAGE OF TWO WEEKS FROM THE DATE OF TRANSMISSION, EVEN FROM
OVERSEAS AND AFLOAT COMMANDS. THESE RAPID REFUNDS GREATLY REDUCE THE NEED FOR ANY TYPE OF REFUND ANTICIPATION LOANS, WHICH STILL HAVE HIGH INTEREST RATES AND CHARGES EVEN WHEN IN COMPLIANCE WITH DOD PREDATORY LENDING LIMITATIONS.
C. FEWER MISTAKES. VITA/ELF RETURNS ARE VERY ACCURATE, AVERAGING LESS THAN A ONE PERCENT ERROR RATE COMPARED TO 15 PERCENT FOR PAPER RETURNS.
4. PAST TAX SEASONS HAVE DEMONSTRATED THAT SUCCESS OF THE VITA/ELF PROGRAM IS PREDICATED ON SUPPORT FROM LOCAL COMMANDS. WHILE THE LOCAL NAVAL LEGAL SERVICE
OFFICE (NLSO), STAFF JUDGE ADVOCATE, OR COMMAND TAX REPRESENTATIVE WILL MANAGE TAX ASSISTANCE CENTERS, THESE CENTERS DEPEND ON LOCAL COMMAND ASSISTANCE TO
PROVIDE THE PERSONNEL, EQUIPMENT, AND FACILITIES FOR A SUCCESSFUL VITA/ELF TAX CENTER.
5. SUFFICIENT MANPOWER IS THE KEY TO SUCCESS. THE SUPPORT OF EVERY COMMAND IS NECESSARY, FROM SENDING SAILORS ON TEMPORARY ADDITIONAL DUTY (TAD) ORDERS FOR THE DURATION OF THE TAX SEASON, TO ALLOWING PERSONNEL TO WORK PART-TIME AT TAX
ASSISTANCE CENTERS DURING NORMAL DUTY HOURS. PART-TIME SUPPORT IS ESPECIALLY CRITICAL DURING FEBRUARY, THE PEAK FILING TIME. THE GOAL IS TO PROVIDE ONE VOLUNTEER OR TAD TAX PREPARER PER 100 MEMBERS OF EACH COMMAND. ONE FULL-TIME TAD TAX PREPARER (TRAINED BY THE IRS AND/OR VITA/ELF TAX OFFICERS) CAN PROVIDE OVER $50,000 WORTH OF SERVICES. INFORMATION ON REQUIRED TAX PREPARER TRAINING OR ABOUT VOLUNTEERING CAN BE OBTAINED BY CONTACTING THE LOCAL NAVY LEGAL SERVICES OFFICE OR LCDR LEE AT THE OFFICE OF THE JUDGE ADVOCATE GENERAL.
6. THE VITA/ELF PROGRAM REMAINS EXTREMELY IMPORTANT. WITH YOUR SUPPORT, WE CAN CONTINUE THIS VALUABLE QUALITY OF LIFE BENEFIT FOR OUR SAILORS AND THEIR FAMILIES.
7. RELEASED BY VICE ADMIRAL SAM J. LOCKLEAR III, DIRECTOR, NAVY STAFF.//
BT
#0000
NNNN

If you aren't sure where VITA is offered near your homeport / duty station, call your local Navy Legal Service Office (NLSO). In each place I've been stationed, if the NLSO wasn't actually where VITA was offered, then they could at least point me in the right direction.

As I read the message above, I realize I should have posted this sooner in the tax season and encourage you consider volunteering for VITA. I don't know if it's too late to get in on it now, but it's a great way to support your local Navy community and get some training and experience working with tax software.

Advice for Junior Officers: VITA

When April of my first year of commissioned service rolled around, I was in prototype and didn't have a lot of free time. So I gathered my tax documents and dropped them off at a local tax place. For $30, they prepared my tax return and had it electronically filed for me.

Not long thereafter, the Navy started the Volunteer Income Tax Assistance (VITA) program.

VITA is a GOOD DEAL.

VITA relies on volunteers who receive some training on using tax filing software and then take your documents and prepare your tax return for you FREE OF CHARGE. Several years in a row, I used VITA to take care of my taxes, and I was never disappointed.

After we had been married a while and had a lot of stuff to itemize, my wife started doing our taxes on her computer. (Thank you Sweetie! You do a great job with our taxes and I appreciate it!)

My recommendations to you division officers and leading petty officers out there:

1. VITA is a great resource for YOU! Take advantage of it!
2. VITA is a great resource for YOUR SAILORS in your division. Get the word out! Find out the location and hours of your local VITA office and push the word out to your division at quarters. From my experience, it's usually at your base Navy Legal Service Office, but if it's not, the NLSO will be able to tell you where it is or who to contact.
3. VITA is an great opportunity for you to volunteer for community service and help out your shipmates. Plus, it's a bullet to add on your fitrep or eval. It's one of those things for you to show initiative and a desire to take on more responsibility. If your command can support you being gone part time in tax season, you can get FREE training on tax filing software and then you can provide a service to your community by volunteering for VITA. Even if you could only do it one afternoon per week, you would still be contributing to the team effort and helping your shipmates out.

Here's this year's NAVADMIN message about the VITA program:

R 241821Z NOV 08
FM CNO WASHINGTON DC//N09//
TO NAVADMIN
INFO ZEN/CNO WASHINGTON DC//N09//
UNCLAS
NAVADMIN 334/08
MSGID/GENADMIN/CNO WASHINGTON DC/N09/NOV//
SUBJ/2009 VOLUNTEER INCOME TAX ASSISTANCE (VITA) ELECTRONIC
TAX/FILING (ELF) POLICY AND PROGRAM GUIDANCE//
REF/A/MSG/CNO/302325Z OCT 07// 
AMPN/REF A IS NAVADMIN 288/07// 
POC/JULKA/LT/OJAG 16/JAG/TEL: (202)685-4641/DSN: 325//
GENTEXT/REMARKS/2009 VOLUNTEER INCOME TAX ASSISTANCE/
ELECTRONIC TAX FILING POLICY AND PROGRAM GUIDANCE// 
RMKS/1. THIS NAVADMIN PROVIDES VOLUNTEER INCOME TAX
ASSISTANCE (VITA)/ELECTRONIC TAX FILING (ELF) POLICY AND
PROGRAM GUIDANCE. THIS MSG SUPERSEDES REF A. 
2. DURING 2008, VOLUNTEERS WITH THE VITA/ELF PROGRAM FILED
MORE THAN 73,000 FEDERAL AND STATE TAX RETURNS, SAVING
SERVICE MEMBERS AND FAMILY MEMBERS MORE THAN $9.1 MILLION
IN COMMERCIAL TAX PREPARATION FEES. BASED ON THE RESOUNDING
SUCCESS OF VITA/ELF IN PAST YEARS, WE WILL ONCE AGAIN
IMPLEMENT THE PROGRAM FOR 2009. 
3. THE VITA/ELF PROGRAM IS A PROVEN WINNER THAT IMPROVES
MORALE AND READINESS - AND KEEPS MONEY IN SAILORS' POCKETS -
BY SIGNIFICANTLY REDUCING THE EFFORT AND COST INVOLVED IN
MEETING FEDERAL AND STATE TAX OBLIGATIONS: 
A. NO PREPARATION FEES. COMMERCIAL TAX PREPARERS MAY CHARGE
OVER $140 FOR THE AVERAGE ELECTRONICALLY FILED RETURN. VITA/
ELF VOLUNTEERS PREPARE AND FILE TAX RETURNS AT NO COST TO
SAILORS AND THEIR FAMILIES. 
B. FASTER REFUNDS. PAPER RETURNS MAY TAKE EIGHT OR MORE
WEEKS TO PROCESS IN CONUS, AND EVEN LONGER IF SUBMITTED
OVERSEAS OR WHILE DEPLOYED. BY USING VITA/ELF, REFUNDS ARE
DEPOSITED DIRECTLY INTO A SAILOR'S BANK ACCOUNT AN AVERAGE
OF TWO WEEKS FROM THE DATE OF TRANSMISSION, EVEN FROM
OVERSEAS AND AFLOAT COMMANDS. THESE RAPID REFUNDS GREATLY
REDUCE THE NEED FOR ANY TYPE OF REFUND ANTICIPATION LOANS,
WHICH STILL HAVE HIGH INTEREST RATES AND CHARGES EVEN IF IN 
COMPLIANCE WITH DOD PREDATORY LENDING LIMITATIONS.
C. FEWER MISTAKES. VITA/ELF RETURNS ARE VERY ACCURATE - LESS
THAN A 1 PERCENT ERROR RATE COMPARED TO 15 PERCENT FOR PAPER
RETURNS.
4. PAST TAX SEASONS HAVE DEMONSTRATED THAT SUCCESS OF THE
VITA/ELF PROGRAM IS PREDICATED ON SUPPORT FROM LOCAL
COMMANDS. WHILE THE LOCAL NAVAL LEGAL SERVICE OFFICE (NLSO),
STAFF JUDGE ADVOCATE, OR COMMAND TAX REPRESENTATIVE WILL
MANAGE TAX ASSISTANCE CENTERS, LOCAL COMMANDS ARE STRONGLY
ENCOURAGED TO PROVIDE PERSONNEL, EQUIPMENT, AND FACILITIES. 
WHEN LOCAL COMMANDS SUPPORT THE VITA/ELF PROGRAM, EVERYONE
BENEFITS. 
5. SUFFICIENT MANPOWER IS THE KEY TO SUCCESS. THE SUPPORT OF
EVERY COMMAND IS NECESSARY - TO INCLUDE SENDING SAILORS
TEMPORARY ADDITIONAL DUTY (TAD) FOR THE 12-WEEK TAX SEASON OR
ALLOWING PERSONNEL TO WORK PART-TIME AT TAX ASSISTANCE
CENTERS. PART-TIME SUPPORT IS ESPECIALLY CRITICAL DURING
FEBRUARY, THE PEAK FILING TIME. THE GOAL IS TO PROVIDE ONE
VOLUNTEER OR TAD TAX PREPARER PER 100 MEMBERS OF EACH COMMAND.
ONE FULL-TIME TAD TAX PREPARER (TRAINED BY THE IRS AND/OR
VITA/ELF TAX OFFICERS) CAN PROVIDE OVER $50,000 WORTH OF
SERVICES. INFORMATION REGARDING REQUIRED TAX PREPARER TRAINING
OR ABOUT VOLUNTEERING CAN BE OBTAINED BY CONTACTING THE LOCAL
NLSO OR THE OJAG POC, LT JULKA. 
6. THE VITA/ELF PROGRAM IS EXTREMELY IMPORTANT. WITH YOUR
SUPPORT, WE CAN CONTINUE THIS VALUABLE QUALITY OF LIFE BENEFIT
FOR OUR SAILORS AND THEIR FAMILIES.
7. RELEASED BY ADMIRAL PATRICK M. WALSH, VICE CHIEF OF NAVAL 
OPERATIONS.// 
BT 
#0000 
NNNN

Advice to Junior Officers: Tax Withholding

A few things came to mind that I thought were worth mentioning for the junior officers that read my blog. As I was writing, this started turning into a really long post, so I broke it up into three parts. Hindsight/Afterthought: This first part is actually applicable to just about anybody, not just junior officers.

Part 1. Tax Withholding.

It's a new year, so you may want to take a quick look at your tax withholding status, especially for those of you who...

• bought a house
  
• sold a house
  
• got married
  
• had a baby

Back when I was a newly-commissioned Ensign, someone taught me the basics of setting up your tax withholdings. Your objective should be to neither owe taxes nor get a big refund from the government at the end of the year. I know a lot of people like to set it up so they get a big tax refund at the end of the year like some sort of annual "bonus" (initially, I fell into that category as a young ensign).

Here's the thing though. If you are having too much money taken out of your paycheck each month and then getting paid back a bunch of it at the end of the year, you are in essence giving the government an interest-free loan. Now, maybe you find some nobility in helping fund the billion dollar bail-outs of the banking and auto industries, but you're financially better off if you have just the right amount of taxes withheld each month. The extra money that was going to the government could be going into your savings account and earning interest for YOU. ...OR!!! It could be going to paying for a babysitter and a nice dinner for you and your spouse to have a date without the kids each month.

When we lived here in Ashburn before, we were married with two kids and a mortgage, and I had my withholdings set to the maximum (10 on the MyPay website), and we still got a few hundred dollars of a tax return at the end of the year.

While we were in Hawaii living in Navy housing (so no mortgage), I turned our withholdings down to 4 because I expected to pay more taxes.

Now that we're back in Ashburn in a very similar situation as our last tour here, I cranked our withholdings back up to 10.

How do you know how many withholdings to claim? You can use this calculator at the IRS website.

How do you change your tax withholdings? For military service members, go to the MyPay website. After you log in, select "Federal Withholding" from the main menu under "Taxes."

Note this page also has a link to the IRS withholding calculator. At the bottom of the page, you can change your number of exemptions.

Don't forget to click "Save" before you click away elsewhere from that web page.

I periodically get emails from junior officers and midshipmen asking for advice on stuff. If you have a question, please feel free to email me. I might not know the answer, but hopefully I'll at least be able to point you in the right direction where to find the answer.