For federal tax purposes, the U.S. Armed Forces includes officers and enlisted personnel in all regular and reserve units controlled by the Secretaries of Defense, the Army, Navy and Air Force. The Coast Guard and National Guard are also included, but not the U.S. Merchant Marine or the American Red Cross.

Normally, combat pay is not counted as income and is not taxable. For the purposes of receiving an economic stimulus payment, however, military personnel serving in combat zones have the option of including their nontaxable combat pay on their 2007 or 2008 income tax returns if it helps their eligibility for the 2008 economic stimulus payments.

To receive the stimulus payment this year, combat zone personnel or their spouses must file a 2007 income tax return by October 5, 2008. Otherwise, they can claim the economic stimulus payment on next year’s income tax return.

Military personnel who normally would not file an income tax return because their 2007 income is not taxable can file a simple Form 1040A with the IRS if they want to receive the economic stimulus payment. They should report their nontaxable combat pay on Line 40b of the Form 1040A to show at least $3,000 in qualifying income. The Department of Defense lists the amount of excluded combat pay, along with the designation, “Code Q,” in Box 12 of Forms W-2.

Combat Zones include the following:
 
A-1: Combat zones are designated by an Executive Order from the President as areas in which the U.S. Armed Forces are engaging or have engaged in combat.  There are currently three such combat zones (including the airspace above each):

• Arabian Peninsula Areas, beginning Jan. 17, 1991 -- the Persian Gulf, Red Sea, Gulf of Oman, the part of the Arabian Sea north of 10° North latitude and west of 68° East longitude, the Gulf of Aden, and the countries of Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
• Kosovo area, beginning Mar. 24, 1999 -- Federal Republic of Yugoslavia (Serbia and Montenegro), Albania, the Adriatic Sea and the Ionian Sea north of the 39th Parallel.
• Afghanistan, beginning Sept. 19, 2001.

Public Law 104-117 designates three parts of the former Yugoslavia as a Qualified Hazardous Duty Area, to be treated as if it were a combat zone, beginning Nov. 21, 1995 -- Bosnia and Herzegovina, Croatia, and Macedonia.

In addition, the Department of Defense has certified these locations for combat zone tax benefits due to their direct support of military operations, beginning on the listed dates:

     In support of Operation Enduring Freedom (Afghanistan combat zone):

• Pakistan, Tajikistan and Jordan - Sept. 19, 2001
• Incirlik Air Base, Turkey - Sept. 21, 2001 through Dec. 31, 2005
• Kyrgyzstan and Uzbekistan - Oct. 1, 2001
• Philippines (only troops with orders referencing Operation Enduring Freedom) - Jan. 9, 2002
• Yemen - Apr. 10, 2002
• Djibouti - July 1, 2002
• Somalia - Jan. 1, 2004  

 In support of Operation Iraqi Freedom (Arabian Peninsula Areas combat zone):

• Turkey - Jan. 1, 2003 through Dec. 31, 2005
• Israel - Jan. 1 through July 31, 2003
• The Mediterranean Sea east of 30° East longitude - Mar. 19 through July 31, 2003
• Jordan - Mar. 19, 2003
• Egypt - Mar. 19 through Apr. 20, 2003

Fraud Warning !
If someone claiming to be from the IRS calls or e-mails you about stimulus payments and asks you for a social security number, bank account or credit card number, it is a scam. The IRS will process stimulus checks based only on information obtained from your 2007 Federal tax filing.