March 18, 1999
FOR IMMEDIATE RELEASE
WASHINGTON, D.C. ---- DEPARTMENT OF DEFENSE FIXES INCOME
TAX PROBLEM; PROMISES MORE MONEY TO
Congressman Faleomavaega announced today that in response to a letter he sent, the Department of Defense has informed him that as a result of changes it made in 1996, the Internal Revenue Service (IRS) inadvertently reduced the amount of taxes it collects to be attributed to American Samoa and the other insular areas.
In 1996, instead of reporting taxes withheld for service members in the Army and Air Force separately by territory, the Defense Joint Military Pay System placed all U.S. territories and some foreign countries into one category, and sent this information to the IRS. As a result of this change, taxes to be transferred to American Samoa were not identified by the IRS computer, and were not forwarded to American Samoa and other U.S. territories. "Governor Tauese and I have been expressing our concern with the greatly reduced rate of income taxes being transferred to American Samoa for some time now," said Faleomavaega. "Although it took some prodding, I am pleased that DOD and the IRS were willing to meet and determine the source of the problem."
State taxes are withheld from a military member's pay based on the "state of legal residence certificate" (DD Form 2058) completed when members first enter active duty. This same form can be used to change one's state of legal residence.
"DOD has agreed to determine the correct amount of taxes withheld from service members with American Samoa as their legal residence for years 1996, 1997, and 1998, and report those amounts to the IRS. The IRS has agreed to forward those amounts to the American Samoa Government," stated the Congressman. "This should provide ASG with the additional revenue to which it is entitled under federal law."
"American Samoan service members who wish to have their income taxes forwarded to ASG should ensure that American Samoa is their "state of legal residence" in their service records. If it is not, they should submit a Form 2058 through their chain of command," Faleomavaega continued.
The `home of record' entry is used to determine the place to which a service member's household goods are sent on completion of active duty, and is a factor in determining if air travel at government expense for emergency leave will be approved. "This is another important entry made when a service member enlists," said the Congressman. "The `home of record' can only be changed if it was entered in error at the time of first enlistment. If you intend to return to American Samoa at the end of your enlistment, or at the end of your career, listing your `home of record' as American Samoa can save you thousands of dollars," concluded Faleomavaega.