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10211: Entering Military Wages for e-Filing Purposes


1040 Individual Generally

How do I enter military wages?

To enter military wages you will need to follow the steps listed below.
  1. For all military wages entered on a W2, select M – Military Wages from the drop list for the Special tax treatment box at the top of the W2 screen.
  2. Combat pay is not taxable and is not included in the taxable amount in box 1 of the W2. It is shown separately in box 12.
    1. Enter combat pay in box 12 with code Q.
    2. Go to the MISC screen (or use the Combat Zone link on screen 1). From the drop list for Special processing code for active military, select the code that corresponds to the combat area.  Possible selections are:
      D – Desert Storm A – Operation Allied Force
      H – Haiti I – Iraqi Freedom
      Y – Former Yugoslavia K – Kosovo Operation
      U – UN Operation E – Northern Forge
      G – Joint Guard B – Enduring Freedom
      F – Joint Forge C – Combat Zone
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
    3. EF Message 5440 will generate if a Special processing code is not selected.
      Note: U.S. Armed Forces members who served in the Sinai Peninsula of Egypt may qualify for combat zone tax benefits retroactive to June 2015 under the Tax Cuts and Jobs Act. For prior years, eligible taxpayers will need to file Form 1040X to claim their refund. See IR-2018-95 for more information.
    4. Combat pay on the W2 can be overridden on screen 8812 in the section Combat Pay (Drake 15 and prior). This screen also contains the election to include combat pay in the EIC calculation.
      • Note that if combat pay is entered as code Q in box 12 of the W2 screen or in the combat pay field on the 8812 screen, the software includes it in the EIC calculation, if doing so benefits the taxpayer.
  3. Basic Allowance for Housing (BAH) is excluded from gross income and is not considered earned income for EIC purposes.
  4. Basic Allowance for Subsistence (BAS) is excluded from the gross income and is not considered earned income for EIC purposes.

For further information

  • regarding the effect of military wages on the Earned Income Credit and Additional Child Tax Credit, see Related Links below.
  • regarding military income and how it affects a tax return, see Publication 3, Armed Forces’ Tax Guide.

Related Links


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