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Attention Military Service Members: The Retroactive Stop Loss Special Pay Will Put a Stop On Your 2010 Tax Refund.

February 20, 2011

I read an article today published by the NATP, the National Association of Tax Professionals, on special military payments and how it affects their 2010 tax returns. In 2009 the Retroactive Stop Loss Special Pay (RSLSP) program  was enacted compensating those military members who had their service extended between September 11th 2001 and September 30th 2009. The RSLSP benefit allows $500 for each month served in a Stop Loss status. Congress set aside $534.4 million for these claims, yet at the end of this month only $219 million in claims have been paid. Many soldiers don’t even know this benefit is available and those who have been receiving this benefit have been surprised to learn that it is taxable. Nowhere on the website did I see any mention about the tax ramifications on this special payment, but I did see an overwhelming amount of video and quotes from Admirals and our own Commander-in-Chief urging these soldiers to claim their  funds before the March 4th 2011 filing date. According to NATP, “All funds received from RSLSP will be reported and itemized on (a separate) W-2 and listed as taxable or tax-exempt and must be reported on the 2010 tax return. Time that was not spent in a tax-free combat zone is subject to federal and state taxes.” This is on top of the mandatory federal and state taxes already taken out of the initial payment. This Stop Loss payment could push service members into a higher tax bracket and affect their earned income tax credit eligibility.

In addition to the oversized video on the webpage, President Obama is quoted as saying, “As your commander-in-chief, I’m here to tell you that this is no gimmick or trick. You worked hard. You earned this money. It doesn’t matter whether you were Active or Reserve, whether you’re a veteran who experienced Stop Loss or the survivor of a service member who did-if your service was extended, your eligible. Help us make sure that America is serving our veterans and your families as well as you’ve served us”. No tricks, no gimmicks. Just one big surprise this tax season. One that could make turn your refund into a payment made to the IRS. For those service members placed on Stop Loss, the American government should have fully served our veterans and their families by making the tax regulations public knowledge. Withholding tax information could cost those soldiers and their families more than they had anticipated, and that isn’t how we should re-pay the brave men and women who put their life on the line so we don’t have to.

If you are a service member who received benefits from the RSLSP program make sure to see a tax professional for your 2010 filings. The knowledgeable and friendly staff here at GAI ( will ensure an error free tax return and work hard to make sure you get the maximum refund possible. We are open Monday-Friday 8am-8pm and Saturdays 8am-5pm and would be honored to serve you as best we can. So give us a call at 212-979-6830 or stop by for a visit.

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