Any reenlistment bonus that you receive is not subject to tax, if the reenlistment occurs in a month that you served in a combat zone.
If you signed your reenlistment contract in March of 2009 and also served in a combat zone in March of 2009, the amount is not subject to tax.
In order to have this amount not be subject to tax, you will need to contact your military pay office to have them redesignate this payment as non taxable. If they do not redesignate the payment, it would end up being reported on your W-2 form
and would be subject to tax, so this is the only way that you can avoid the tax, is by having them correct the designation of this payment.
My guess is that since you signed the reenlistment contract prior to reporting
to the combat zone, they likely classified it as taxable based on your non-combat zone status at the time of signing. However, since you were assigned to a combat zone later that same month, they should make this correction for you.
Please refer to the following publication on page 8 which talks about this under combat zone exclusion.
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