Should my re-enlistment bonus have been taxed since I was back on U.S. soil when I receive it?

2022-08-10T16:53:31-04:00

While I was overseas I re-enlisted and was authorized a bonus, lump sum and tax free.

Fast forward to being CONUS I have received the lump sum but it was taxed. So I go and speak to people in the chain and it was explained to me that if I had been overseas when it was paid out it would not be taxed but because I was back on U.S. soil that it is taxed and I receive it back after doing my taxes.

So, am I getting screwed by Uncle Sugar like so many before me or is it legit?

Response by CPT Private RallyPoint Member made Aug 10 at 2022 6:13 PM

2022-08-10T18:13:24-04:00

That is exactly how it works. However, you are probably going to get a chunk back based on your total net income (bonuses are taxed much higher than regular earnings) when you file your next return.

When I was deployed down range (AFG) there was an SF MSG in the team I supported (intel analyst) who jumped on a $150K bonus. All the SF guys that could time it correctly jumped on the band wagon. So basically the guy got a HOUSE he was going to retire into with that untaxed money.

Another "perk" we over look as service members is BAH is not taxed. So effectively for many of us 50% of our income is NOT TAXED which translates into a relative higher after tax income to our civilian counterparts with the same Gross Income.

I was frustrated by the 10% savings program for those of us deployed. We were allowed $10K into a 10% guaranteed savings account. The catch was we could not deposit any more into the account at any single time than the max of our gross income. So field grade officers could do so in a single transaction while us enlisted peons had to do it over multiple pay periods (regardless if we had the money that we could have moved in there elsewhere).

Anyway............. If you are CONUS you are paying CONUS taxes.

Now........... maybe (consult a tax attorney) if the time you SIGNED and committed to the bonus you were overseas you could claim that's the TIME you earned the income. If that works you should be able to reduce your tax obligation, but again, it would be at the time you next file taxes.

Response by SGM Private RallyPoint Member made Aug 10 at 2022 8:20 PM

2022-08-10T20:20:24-04:00

Money you receive in a CZTE is not taxed.
Money you receive outside of a CZTE is taxed.

Response by SFC Private RallyPoint Member made Aug 11 at 2022 1:26 AM

2022-08-11T01:26:16-04:00

To get real specific with it, your tax is based on the day you're entitled the bonus, that's the day your new enlistment starts. In the Regular Army you are discharged immediately and your new contract starts that day. That day, whatever your eligibility is for a bonus and tax liability is what you receive.

If I'm not mistaken, in the RC your new contract starts the day after your old one ends. That's the day your tax liability is assessed. If I'm wrong about that and you are discharged that day you signed your contract, then you can go to finance and ask for a form to be paid back the amount you were taxed by DFAS.

Response by A1C Medrick "Rick" DeVaney made Aug 11 at 2022 9:31 AM

2022-08-11T09:31:44-04:00

If I Understand Properly,
You'll Be Taxed, Whether You're State Side Or Overseas.
The Only Difference Is: If Your Stateside, You'll Pay Full US Income Taxes.
If Overseas, You'll Only Be Responsible For A Certain Portion Of The US Income Taxes.
As A Non-Resident US Citizen.. The Amounts Are Based On Your Total Income...
Just As Though You Lived In The States All That Year & All Your Income Was Derived Here.

Response by A1C Medrick "Rick" DeVaney made Aug 11 at 2022 10:02 AM

2022-08-11T10:02:01-04:00

Somewhat Of A Change Of Subject,
But, I've Had Some Schooling Overseas As A Kid And Was Taught A Considerable Amount of Money And Finance Information, While Stateside Schools Teach NONE,
Not Even Enough Information To Balance Their Own Personal Checking Accounts
It's No Wonder So Many People Here Have Little To NO Knowledge Of Their Own Finances;
And Therefore, A Large Volumes Of Bankruptcies Take Place,
With Little In Savings, And Even Less In Investment Funds, Therefore Paying More Income Taxes Than Are Necessary, As They Haven't A Clue As To Why & How To Reduce Their Income Taxes While Increasing Their Actual Incomes.
It's Not Magic, But Simply Some Knowledge Of Finances & Taxes. ...
So Little Information About Them, In Fact; They Can Actually Be Easily Learned & Understood In One Afternoon....
Hardly The Required Knowledge Of a CPA.
Just Some Basic Math & A Little Knowledge.
For Details Talk To Your Financial Institutions & Their Investment Counselor,
And Ask About Real Estate Investing. I Say "Real Estate", Because It's The Easiest To Understand & Best Place To Put Your Investment Monies For A Continued Increasing Of Values..
They Can Explain It's Process: Nothing To It.