How to Prove Combat Zone Status to the IRS

The combat zone postponement is powerful, but it only works if the IRS knows you qualify. Section 7508(e)(2) of the Internal Revenue Code lets the IRS assess and collect without regard to the postponement unless, before it acts, it has been ascertained that you are entitled to it. Translation: the burden of getting your status on the record falls, in practice, on you.

The good news is that the IRS's own manual makes this easier than most people expect.

What the IRS accepts as proof

IRM 5.1.7.10.2, Substantiation Procedures for Section 7508 (Combat Zone) Postponement, sets three tiers.

1. Common knowledge. When it is common knowledge or apparent that the taxpayer is combat zone personnel, oral testimony is acceptable proof.
2. Written substantiation. When it is not common knowledge or apparent, the IRS requires written substantiation, such as a copy of the military or civilian orders or a statement issued by the Department of Defense attesting that the combat zone qualifications are met.
3. Signed statement. A signed statement from the taxpayer or a contact, such as a spouse or attorney, will be accepted as substantiation when a copy of the orders or a DoD statement is not easily accessible.

That third tier is important for families. If the servicemember is downrange and the orders are with them, a spouse's signed statement can carry the day.

The manual also notes that the IRS may already have identified you as combat zone personnel by putting a -C freeze on your account. If so, much of this work is done.

A warning the IRS puts in writing

The same IRM section contains a note worth taking seriously: falsely claiming special treatment for combat zone relief can be used as evidence of willfulness if the issue arises later. Do not stretch it. If the service was in a location that is not a designated combat zone, qualified hazardous duty area, certified direct-support area or qualifying contingency operation, find out before you claim the postponement.

What a good statement contains

Whether you are attaching orders or relying on a signed statement, give the IRS everything it needs to calculate the postponement in one shot:

• Full name and Social Security number of the servicemember, and of the spouse if a joint return or joint balance is involved.
• Branch of service.
• The combat zone, hazardous duty area or contingency operation.
• The date of entry. If still deployed, say so.
• The date of exit, if known.
• Any period of hospitalization for an injury incurred there, with dates.
• The tax years and notices involved.
• A statement that the taxpayer is entitled to postponement under IRC 7508.
• Signature and date, and the signer's relationship to the servicemember if someone else signs.

Entry and exit dates drive everything

The IRS calculates the suspension period from transaction codes on your account. IRM 5.1.7.10.3.4 explains that the suspension starts on the date the combat zone entry code posts and ends 180 days after the exit date, extended by up to 105 days (106 in a leap year) if you were in the zone for the entire filing season. The manual says the entry and exit dates must both be present for the system to know when to reactivate the account.

If the exit code is missing, the manual directs the IRS to send Letter 2761C, Request for Combat Zone Service Dates. If you receive that letter, answer it promptly. An account stuck without an exit date can sit in limbo, then snap back into collection when the IRS fills in a date on its own.

Two dates. Entry and exit. Get both on the record and most of the problems go away.

Where to send it

Send your response to the IRS office or address on the notice you received. If no notice is involved and you simply want the record corrected, the safest route is to include a statement with your return, or to call the number on any IRS correspondence and ask where to send combat zone documentation. Keep a copy of everything and proof of mailing.

Spouses and family members acting for a deployed servicemember

A spouse can provide the substantiation statement. If a spouse or family member needs to do more, such as discuss the account, receive information, or sign forms, they need authority. The IRS accepts a military power of attorney in some situations, and it accepts Form 2848. Our guide to IRS powers of attorney for deployed servicemembers explains how those fit together.

Civilians and contractors

Section 7508 covers individuals serving "in support of" the Armed Forces in a combat zone, and the IRS manual lists civilian personnel acting under the direction of the Armed Forces in support of those forces, Red Cross personnel, accredited correspondents and certain merchant mariners. If you are a civilian, your proof is usually your orders or a letter from the agency or command you supported. The same written substantiation rules apply.

Business accounts

If the deployed person owns a sole proprietorship, partnership or personal service corporation that stopped operating when they deployed, IRM 5.1.7.10.1 allows the business accounts to be postponed too. The IRS will want the history documented, so add a sentence about the business, the date it stopped operating, and who, if anyone, handled wind-down tasks.

If collection already started

If a levy hit before the IRS knew you were deployed, send proof immediately and ask that the account be coded and the levy released. IRM 5.11.6.5.1 tells IRS employees that no levy action is to be taken on a taxpayer in a combat zone. See our guides on the combat zone freeze and levies on active duty pay.

The IRS has made proof simple on paper. Make it simple in practice: one clear statement, two dates, and a copy of your orders when you can get them.