Arthur Kamlet wrote:
- quote -

Apparently not. There is a line item on the back side of
the 1040 for that.

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Harlan Lunsford <hnslunsford[at]bellsouth.net> wrote:
- quote -

It's much easier to sell favored tax treatment for military
personel serving in a combat zone than for Crazy Eddie and
his Fabulous Used Car Sale-o-rama.

- quote -

Congress

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Arthur Kamlet wrote:
- quote -

The election is on Line 65b of the 1040. This is a new line
entry on the 1040. The W-2 would have to have the
nontaxable amount on Box 14 with the Q code.

--
Alan
http://taxtopics.net

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- quote -

I'd expect that COULD be the reason, since it is not
excluded from SS tax on W-2 lines 3 & 5 AND because of the
applicable options for TY's 2004 and 2005.

A-37: A change in the tax law for 2002 and later years
removes from the definition of "earned income" for purposes
of the EITC all employee compensation that is not includible
in gross income. Thus, for example, excludable combat zone
compensation, the Basic Allowance for Housing (BAH) and the
Basic Allowance for Subsistence (BAS) no longer count as
earned income for EITC purposes. With this change, your
income may fall within the qualifying range to claim the
credit. But if the exclusion leaves you with no earned
income, you would not be able to claim the EITC.

The Working Families Tax Relief Act of 2004 gives you the
option of treating excludable combat pay (but not BAH or
BAS) as earned income for purposes of figuring the EITC.
This could help you avoid a situation in which the military
pay exclusion left you with no earned income and thus no
credit. Under this option, you include either all or none of
your combat pay when figuring the EITC â€" you cannot choose
to count only a part of it. This option applies for Tax
Years 2004 and 2005 only.

This Act also provides that excludable combat pay (but not
BAH or BAS) is treated as taxable earned income when
figuring the Child Tax Credit, for years after 2003.
Treatment of combat pay as earned income when figuring this
credit or the EITC does not change its exclusion from
taxable income.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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Arthur Kamlet wrote:
- quote -

Apparently so.

What's going to be interesting, maybe, is to see how IRS
programs computers to allow the calculation. As I
understand it, the new law allows a soldier to include the
amount IF he wants to, i.e. where it will benefit, and
choose not to include if that amount would add to income on
the upper side, thus decreasing the EIC.

by the same token then, IRS should maybe allow schedule c
taxpayers to choose whether or not to include certain
expenses in computation of net profit on which to base the
EIC. Food for thought. Sauce for the goose .... sauce for
the gander. Something lilke that.

Who said you can't have your cake and eat it too?

ChEAr$,
Harlan Lunsford, EA n LA
Fri, 5 Nov 2004 08:52:31

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John H. Fisher <taxservice[at]aol.compliance> wrote:

- quote -

Is this the mechanism for electing to include nontaxable
combat pay as wages for the purpose of EIC and Child Tax
Credit?

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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To avoid Error Reject Codes 0123, 0295, 1044, and 1068, all
tax returns with Nontaxable Combat Pay must have SEQ 0100
Special Processing Literal equal to COMBAT ZONE or one of
the other permitted combat zone literal values.

For military employees, DFAS will report Nontaxable Combat
Pay on Forms W-2 in Box 14, simply labelled with the letter
Q for TY 2004. Effective for TY 2005, Nontaxable Combat Pay
will be reflected in Box 12 of Form W-2 with a Code Letter
Q.

----------
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