As we all know from experience, the military pay system is subject to unexplained changes and errors. You’ve probably heard stories of service members who received huge overpayments or went unpaid for months. Heck, they kept paying my own husband’s Hawaii BAH for months after we were no longer eligible to receive it – resulting in a $10,000 “debt”.
Check your leave and earnings statement
Overpayments are one of the many reasons you need to check your Leave and Earnings Statement (LES) every month. A quick look at your salary, allowances, deductions and allowances can identify problems the first month they arise. Taken early, you can ultimately reduce the total amount of overpayment or underpayment.
In particular, always verify that your state and federal taxes are withheld at a rate that is appropriate for your situation. I’ve heard many readers say they’ve had months without tax deductions from their military pay. While it’s nice to have that extra money on your paycheck right now, an incorrect deduction means you’ll owe more or receive a smaller refund later.
Related: How to read your LES
As long as your total tax withholding for the year is within the correct range for your actual tax liability, it may not matter to you. But if taxes aren’t withheld for several months, you’re going to have a bill come tax time — maybe a big bill.
What to do when your salary is not fixed
Sometimes a service member identifies the problem and for some reason it just isn’t fixed quickly. This can create long term problems if you are overpaid and that money is spent.
The simple solution? Don’t spend it.
Create a separate savings account for the amount you know you are overpaid (like our Hawaii BAH). If you don’t have taxes withheld, look at the last ERP where taxes were withheld correctly and use that number. With each paycheck, transfer half of this amount to your special savings account for overpayment. This means you will be ready when you need that money. This can happen when the paperwork catches up and DFAS starts withholding some or all of your regular pay, or it can happen when you file your taxes and owe a portion to the federal government, state government, state or both.
What else should you check on your LES?
In addition to tax deductions, you should take five minutes each month to download your LES and verify the following information:
- Correct remuneration and allowances
- BAH is based on the correct postcode
- TSP contributions are withheld as requested
- Leave was billed correctly
- SGLI/FSGLI coverage is correct
- All debts that have arisen or are in the process of being paid
- Allocations are accurate
- The good state for income taxes
Checking your LES when it is issued each month only takes a few minutes. Finding mistakes in the first month can help fix them faster or help you know how to keep overpayments aside for when you need that money.
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