I am a government contractor and served 3 months in a combat zone. How do I apply the combat zone tax exclusion on my return? https://www.irs.gov/newsroom/combat-zones

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February 26, 2020
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CatinaT1

The income earned while in combat is generally not listed in box 1 of your W2, but in box 12 with a code Q, so there is nothing additional to do.

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rqjohnson2Author

@CatinaT1 ,

all of my income was listed in box 1(none in box 12 with a q code), however i contacted my accounting department and found out exactly how much i made while on deployment. is there another way to deduct it?

DaveF1006

According to the IRS link, you may qualify to exclude this pay as foreign income exclusion. in fact, Certain U.S. citizens or resident aliens, specifically contractors or employees of contractors supporting the U.S. Armed Forces in designated combat zones, may now qualify for the foreign earned income exclusion. To report this in Turbo Tax:

To enter Foreign Earned Income -

Click on Federal
Click on Wages and Income
Click on I'll choose what I work on (if shown)
Scroll down to Less Common Income
On Foreign Earned Income and Exclusion, click on the start or update button

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DK1970

It has been my understanding that the new 2018 tax law change only took care of the Tax Home test for contractors working in combat zones. We still MUST meet either the Physical Presence Test (330 Days) or Bona Fide Residence Test in order to qualify. I as an example work in combat zones for 180-200 days per year. I do not claim FEIE because I do not get 330 days nor do I consider myself a resident of Afghanistan since I live in a military barracks for 60 days at a time and then go home for to the USA for 60.

Additionally, I think the "Waivers" you are talking about are not correct. The waiver does NOT apply to places like Afghanistan or Iraq for example. Those places were already combat zones when you arrived. In fact, if it were not a combat zone you would not be there in the first place. The "Waivers" they talk about is when someone was in Myanmar and was planning to stay there for at least 330 days. Once there was a coup against the government and people were getting killed it was no longer safe for Americans to stay there. In this case the State/Treasury Departments may list Myanmar as a location that qualifies for the "Waiver". Afghanistan and Iraq are not on that list published by the State/Treasury Departments as eligible for the waiver. If there is any doubt about this, please see the link below about an accountant that many contractors used to use that was doing the waivers until he got busted.

https://www.justice.gov/opa/pr/justice-depart[product key removed]it-enjoin-las-vegas-man-preparing-returns-containing-foreign

Bottom line, if you were a contractor in a combat zone for 3 months you are almost certainly responsible for taxes on that income.

jynthea76

I am honestly pretty freaking annoyed right now with this whole thing. I was unaware something like this even existed and today I go to file my taxes and on a whim I google if you can do this and from what I have read my husband qualifies but turbo tax does not seem to want to help me with that in the software. My husband went to Afghanistan in march of 2020 as a contractor for a company who supports the US Armed Forces, and he was there up until we pulled out last yr, save for like 2 months when he came home to visit and the company did a horrible crap job of getting him back there when they should have. He was home from oct 2020 to the week before thanksgiving in 2020. That is likely past that 330 day mark thing and all of his income was listed in box 1 and he bought some meals there and other things he needed and we did not exactly track that stuff because we did not know to so how the heck are we even supposed to fill in the thing that they show you and why does it not let you enter whatever amount you can to exclude. He was not reimbursed for any of it either.

LeonardS

For military and civilian personnel of the US government, the amount of income that can be excluded from tax is already shown on Form W-2. The amount of wages shown in box one does not include any combat pay. In other words, the combat zone exclusion has already been factored into the income reported to the IRS. There are no special forms to fill out regarding the combat zone.

The Foreign Earned Income Exclusion (FEIE) is a different exclusion separate from combat zone exclusion.

To qualify for the FEIE, you must be one of the following:

A bona fide resident of a foreign country (or countries) for an entire tax year.
Physically present in a foreign country (or countries) for at least 330 full days during any 12-month period.

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