European Stars and Stripes (Newspaper) - January 22, 1990, Darmstadt, Hesse                                State taxes at a glance Rhode Conn. � new Jersey Delaware Maryland Missouri Kentucky a " Tennessee military pay no stale tax. Somo exemptions is taxed military pay is or military pay. Exempt or state for Stato by state specifics tax Only on Contact a military Community investments Legal assistance Otico f the audit Man Calls. By Randy Mcclain financial writer Odds arc you la never be audited by the internal Revenue service but if you arc most military tax advisers suggest you fully cooperate. Basically if you be got an auditor who is trying to do his or her Job faithfully you be got nothing to  said Bob Daly a tax lawyer in Frankfurt West Germany and inc survivor of several audits himself. John Mann san chief Legal adviser with v corps in Frankfurt suggests a human approach rather Bob Daly than ii confrontational one when dealing with the irs. A lot of audits overseas Don t involve Complex issues he said. However some tax advisers say taxpayers should provide the irs Only with the information that an auditor specifically requests. But Martinsen says the vast majority of military taxpayers should simply present their Case to an auditor openly and Hope for the Best. Most audits of cry  arc the result of taxpayers unintentional blunders he said not shrewd mane vering to escape paying one s fair share. One thing is Clear about audits. Most Scricc members will never be faced with one. In 1987 and 1988, Only 1 percent of All returns were audited according to the latest figures from the irs. Daly said your Chance of being audited increases with income. If you made More than Sis Susan Harris $50.0 10, there s a 2.3 percent Chance of an audit and if you made More than $ 100,000, there s a 4 percent Chance of one. Your chances also go up if your math is wrong. A Large number of mathematical errors on your return can single it put for special attention and might Lead to questions about other items. Random selection is another method used to determine which taxpayers get audited. But there s no Way to escape that i Salla matter of whether your number comes up based on selection criteria in the irs computer. Daly said most Scricc members have nothing to fear. A much higher percentage of doctors lawyers and accountants Many of whom arc in High income brackets get audited than do soldiers sailors and airmen. Martin san and Daly suggest unlucky Servic members who arc singled out can probably survive an audit without a lax lawyer s help unless Complex issues arc involved. If you want a lawyer s help expect to pay in the neighbourhood of $500 for a moderately complicated Case Daly said. Earned income credit Falls through the cracks again by William j. Bartman staff writer for years  living overseas have been prohibited from claiming a tax credit designed to help lower income families. Well this year is no different. Congress has again failed to rewrite the provision of the tax code that excludes government employees abroad from qualifying for the earned income credit. Thus about 25,000 military personnel will be ineligible for a tax savings of up to $910. The key is that to qualify for inc credit citizens must except for temporary absences keep up a Home in the United states for a child who lives with them for More than half a year. Military personnel who keep a Home for their child overseas do not meet that test. Cmdr. Pat Kuziak of the defense department s compensation office estimated that 25,000 people e-5 and below who live abroad could claim the credit if they lived in the United states. Kuziak said that most of the Servic members would not qualify for the maximum. He estimated that they arc losing from $40 to $600. To qualify for the credit a taxpayer must have earned less than $ 19,340 in 1989. No foreign income is allowed. The Filer must file either a married joint return As head of the household or As a qualified widower. Secretary of defense Dick Cheney has supported legislation to extend the credit to those living overseas. The proposal also has been endorsed by the Treasury department and was expected to be part of the budget reconciliation package passed by Congress late last year. However it was not included when plans to substantially increase inc credit never made in into the package the proposal would have clarified what is earned income for military people As Well As extended the credit to overseas personnel. The irs already has adopted the Pentagon s definition of earned income. Kuziak is nop caul the proposal which was to be effective in 1991, will make it into a tax Bill sometime this year. Regardless the proposal remains on the legislative agendas of both the House ways and Means committee and the Senate finance committee. I be been told it s not a question of if it s a question of when said Kuziak. Is financial planning guide january 22,1990