Question

How does MSRRA work if I am a self-employed sole prop operating outside of my home of record?

Forum|Forum|5 years ago
August 7, 2020
2 replies
0 views

I live and operate a business as a sole-prop in California. However, my home of record is Wisconsin since my husband and I are both from there and he is active duty.

It's my understanding that I still need to pay taxes on any income earned from my business that was conducted in California and as such I've been filing taxes in California for my income.

Is this correct? I file jointly with my husband and I believe the TurboTax program only files his income with federal and Wisconsin. I want to make sure I am indeed supposed to file my self-employed income with California and not Wisconsin.

Does the self-employed tax program understand situations like these? I use TurboTax to file every year and am wondering if it all being filed correctly considering these abnormal circumstances.

Not A Product Question

Critter-3

Due to the recent rule changes on CA SE income I highly recommend you talk to a local tax pro to get educated on this situation ... make sure they understand the MSRRA rules.

T

TomD8

Since WI, like CA, is a community property state, your CA tax filing should follow the rules shown in Section 8 on page 10 of this CA tax reference:

https://www.ftb.ca.gov/forms/2019/2019-1032-publication.pdf

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

R

redheadwahineAuthor

California source income includes income from all of the following:

"A trade or business located in California except to the extent it receives income for services performed by the MSRRA-qualifying servicemember’s spouse."

So am I correct in taking this to mean that since I am the one performing the services for business (in this case photography) my income falls under MSRRA and I should claim it in WI?

If I've previously paid taxes to CA for my business income in the past, is this something I can be penalized for or is MSRRA just a benefit you can choose to use?

T

TomD8

<<So am I correct in taking this to mean that since I am the one performing the services for business (in this case photography) my income falls under MSRRA and I should claim it in WI?>>

The VBTA law of 2018 gives military spouses the choice of filing taxes either in their own domiciliary state, or in the domiciliary state (SLR) of their active duty servicemember spouse.

Since you and your spouse are both domiciliary residents of WI, you must report your income to WI.

See Question 9 of this reference:

https://www.revenue.wi.gov/Pages/FAQS/pcs-military.aspx#:~:text=Note%3A%20If%20your%20spouse%20is,is%20taxable%20only%20to%20Wisconsin.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.