5 Signs Military Families May Need A Tax Professional
Tax season can feel simple and routine until it isn’t. I know the feeling. Does this scenario sound familiar? “Last year, taxes were easy. Now it’s February and I am working through my tax filing. Seemingly, without warning, my situation has tipped over the fence of simplicity to the side of complexity, but it’s too late in the tax season to find someone to help. Now what?” As you begin to consider tax season next year, there are some warning signs that should cause you to reach out to a tax professional next November or December at the latest.
For active duty service members, veterans, and military families with growing assets or transitioning careers, tax complexity tends to increase quickly. The cost of a mistake can far exceed the cost of professional guidance. Below are the top five reasons to seek professional tax help this season or in the future, especially if your financial life is becoming more complex.
1. You Own Rental Property (Especially in Multiple States)
Rental real estate is one of the most common ways military families build wealth. It is also one of the most common ways taxpayers create avoidable tax problems.
Why Rental Property Complicates Taxes
Capital improvements vs. repairs
State income tax filings in multiple states
1031 exchange considerations
Military families often turn previous duty stations into rental properties. Over time, that can mean income sourced from several states. Each state may have its own filing requirements, thresholds, and rules.
The Depreciation Mistake Most People Miss
One of the biggest errors rental owners make is forgetting to depreciate the property. Depreciation is not optional in the eyes of the IRS. Even if it is not claimed, the IRS assumes it was taken when the property is sold. That means you could owe depreciation recapture tax on deductions you never actually received.
Correcting missed depreciation often requires filing Form 3115 (Change in Accounting Method), which is not something most DIY filers are comfortable handling. If you own rental property at all, especially in multiple states, professional tax oversight is often warranted.
2. You’re Confused About TSP/401(k)s vs. IRAs and Their Tax Deductibility
Retirement accounts are powerful tax planning tools. They are also frequently misunderstood. Many taxpayers do not fully understand:
The difference between a Traditional TSP/401(k) and a Roth TSP/401(k)
The difference between a Traditional IRA and a Roth IRA
When IRA contributions are deductible
Income phase-outs for deductions
How employer plans affect IRA deductibility
For example:
Traditional TSP/401(k) contributions reduce taxable income automatically.
Traditional IRA contributions may or may not be deductible depending on income and whether you are covered by an employer plan.
Roth IRA contributions are never deductible.
Roth TSP/401(k) contributions are made with after-tax dollars.
These differences can significantly impact both current tax liability and long-term retirement outcomes. Military families also have additional considerations:
Combat zone tax exclusions
State tax residency during service
Misunderstanding deductibility can lead to missed deductions or double taxation later. If retirement contributions feel confusing or uncertain, professional guidance can prevent costly mistakes.
3. You Completed a Roth Conversion and Did (or Didn’t) File a Form 8606
Roth conversions can be a powerful tax planning and optimization strategy. They are also easy to report incorrectly. When converting pre-tax IRA assets to a Roth IRA:
The converted amount is generally taxable.
Any after-tax basis must be properly tracked.
IRS Form 8606 must be filed to report nondeductible contributions and track basis.
Failure to file Form 8606 correctly can result in:
Double taxation
IRS notices
Penalties
Permanent loss of basis tracking
This becomes even more complicated if you:
Have multiple IRAs
Previously made nondeductible contributions
Are subject to the pro-rata rule
Are coordinating conversions around military retirement or a high-income second career
A tax professional ensures:
Proper basis tracking
Accurate conversion reporting
Strategic tax bracket management
Roth conversions should rarely be viewed as just a tax filing issue. They are a long-term planning strategy that deserves coordinated oversight.
4. Your Income Has Increased or Become More Complex
A promotion, bonus, side business, or transition to civilian employment can quickly change your tax situation. Common triggers for professional help include:
Dual-income households
1099 income or consulting work
Stock compensation
High-income phaseouts
Backdoor Roth IRA contributions
Itemized deductions
Alterntative Minimum Tax exposure
Military members separating or retiring often experience a sharp income shift. Pension income, VA disability benefits, civilian salary, and possible state tax changes create a multi-layered tax profile. Higher income also introduces:
Additional Medicare tax
Net Investment Income Tax
Phaseouts of deductions and credits
Child tax credit limitations
Education credit income limits
When income increases, tax planning becomes more important than tax filing.
5. You’ve Received an IRS Notice or Feel Uncertain About Past Returns
Sometimes the trigger is simple: something does not feel right. Warning signs include:
Missing prior-year filings
Amended returns needed
Missed deductions discovered later
Unfiled Form 8606 from previous years
Forgotten depreciation on rental property
Many taxpayers avoid seeking help out of fear. In reality, addressing issues early typically reduces penalties, stress, and long-term costs. Tax professionals can:
Respond to IRS correspondence
Amend prior returns correctly
File accounting method changes
Clean up basis tracking errors
Implement forward-looking tax planning
Peace of mind alone can justify professional involvement.
Choosing the Right Level of Tax Help
As your financial life becomes more complex, tax support should scale with it. Here is a simple guide as you consider your taxes this year:
Level 1: Basic Return
Best fit: MilTax
W-2 income, standard deduction, no rental property, no Roth conversions, and straightforward retirement contributions. Free filing options are often sufficient.
Level 2: Some Added Complexity
Best fit: On-base tax assistance (look up your specific base tax center)
Itemized deductions, a working spouse, brokerage income, education credits, or IRA deductibility questions may justify installation support during tax season.
Level 3: Real Estate or Strategic Moves
Best fit: Enrolled Agent (EA)
Rental property, multi-state filing, missed depreciation, Roth conversions, Form 8606 reporting, amended returns, or IRS notices typically require specialized tax expertise.
Level 4: Integrated Tax Strategy
Best fit: CPA
Business ownership, multiple income streams, stock compensation, military pension plus civilian salary, or large capital gains events often warrant coordinated tax planning.
Key Takeaway: Plan Ahead
The most costly tax mistakes rarely come from negligence. They come from waiting too long to recognize that your financial life has outgrown basic software or seasonal assistance.
If any of the five situations outlined in this article apply, the best time to seek professional guidance is not when documents start arriving in January. It is late fall, when there is still time to plan. Remember:
Tax filing looks backward.
Tax planning looks forward.
As income, assets, and opportunity grow, your tax strategy should evolve as well. Matching the level of complexity in your life with the right level of professional support is not an admission of defeat. It is a disciplined financial decision.
For military families building long-term wealth, that discipline often makes the difference.
Disclaimer: This article is provided for educational, general information, and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Read the full disclosure.