Washington (Nov. 25, 2003) -- The Internal Revenue Service is helping taxpayers use a new law providing income exclusions for death benefit payments and certain home sales. Both provisions are retroactive, so some qualifying taxpayers must file amended returns to claim these tax breaks. The IRS asks them to put the words "Military Family Tax Relief Act" in red at the top of such returns to speed processing.

The new law doubled the benefit paid to survivors of deceased armed forces members to $12,000, made the entire amount tax-free and made the changes effective for deaths occurring after Sept. 10, 2001. Previously, only $3,000 was tax-free. Recipients who already paid tax on benefits received for deaths after the effective date should file an amended return on Form 1040X, reducing their adjusted gross income by the $3,000 they had reported as taxable. Those who receive such "gratuity" benefits in 2003 and future years will not have to report them on their tax returns.

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