Insurance and Taxes--Help!

aspen
Mon, 19 Jun 2006 22:23:26 +0000

Here’s the tax information provided by USMA to the Plebes last year. It’s a breakdown and explanation of the $33,000 value Shogun referenced. I don’t know how the USNA support for cadets differs. Sorry for the spacing.

MEMORANDUM FOR FOURTH CLASS CADETS

SUBJECT: Income Tax Information


Many of you as fourth class cadets have questions concerning the income tax consequences of cadet pay and allowances. This memo provides information from the standpoint of both your tax return and your parents’ return for 2005. It is very important that you share this data with your parents.
This memo is based on the tax laws and current rulings of treasury officials. It is, however, informative only and does not necessarily reflect the official position of the Internal Revenue Service or the Department of the Army.
All cadets at the Academy must file their own income tax returns.
Each fourth class cadet who entered the Academy on 27 June 2005, and
remained through 31 December 2005, has received or had credited to their
account during 2005 base pay of $5,030.56. Cadets must report this
amount as income from the Army. In addition, each cadet received a
$5,060.00 pay advance to assist with the payments of uniforms,
textbooks, computer, software and various school fees.
Your parent(s)/guardian(s) must have contributed more than half
of your support for the year in order to claim you as an income tax
exemption “More than half the support” refers to dollar value, and
not to the length of time support was furnished. Your parent or
guardian may properly include the cost of board, clothing, lodging,
medical and dental care, education, property and furniture, insurance, etc., they furnished you when they calculated their level of support. If you lived at home during the first six months of 2005, your parent or guardian may include a proportionate amount of the family food bill, utilities, rent or house payments, interest, taxes, etc., as part of your support. If you attended college, prep school, or high school prior to entering the Military Academy, your parents may also include the amount they paid for tuition, books,
school supplies, and transportation to and from school as parental support.
In determining the value of support furnished from sources other
than your parents, you must include both taxed and untaxed support
amounts. This simply means that the portion of your taxable pay
spent on your own support must be included, and in addition, the
support provided by the Army in the form of food, lodging, education
and other services must also be included. Even though the value of
Army support is not taxed as income, the value must be considered
when determining who provided more than half of your support. The
following chart indicates values of support furnished by yourself and
by the Army.


MARM-FO-MA-T (1)
SUBJECT: Income Tax Information

Cadet Pay earned from 27 June through 31 December - $5,030.56
Government Pay Advance - $5,060.00

Subsistence (Meals)
27 June through 30 September - $ 609.60
1 October through 31 December - $ 598.00

Room and Board $1,480.50
(Half year per USMA’s FY04 Cost of Education Report)

Education(2004 tuition cost per semester at the USMA - $20,818.50

TOTAL SUPPORT BY THE CADET AND BY THE ARMY - $33,597.16


In our opinion, if your parent has not provided at least $33,597.16 in support, then your parent may not be able to claim you as an exemption. If your parent has provided more than this amount in support, then your parent is entitled to claim you as an exemption. Under IRS regulations, if your parent can claim you, you cannot claim a personal exemption for yourself, and you will have to complete a worksheet to compute your standard deduction.
The question may arise whether an appointment to the Military
Academy can be considered a “scholarship award” within the meaning of
the income tax laws. The Internal Revenue Service has ruled that
such an appointment is not a scholarship award and that the education
provided by the Military Academy must, therefore, be included as an
item of support furnished by the Army.
I trust that the information provided, although necessarily general in nature, will be of assistance to you and your family. The above information is provided to ensure that you and your parent(s)/guardian(s) have sufficient data to calculate income tax returns.
Any questions by your parent(s)/guardian(s) concerning the proper methods of calculating dependency should be resolved through independent legal counsel, Publication 17, and/or contact the Internal Revenue Service
/s/
THOMAS M. REMO
ActingTreasurer, USMA