Question

Military Tax with Spouse from Different State (CA and RI), just moved overseas

Forum|Forum|7 years ago
March 19, 2019
1 reply
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Hello,

I've been trying to sort out the right way to file our taxes since this is our first year filing jointly. I am active-duty military, my home-of-record is Rhode Island. My wife is a California resident. In August, we moved from California to Japan with the military. My wife continues to work remotely for the same California company. We are filing jointly federally.

For states, if we file jointly (I believe in California we have the choice to file joint or separate, not sure about Rhode Island), do we still report ALL income, even though only half is due to each state? Will it be necessary to take a credit for tax paid to the other state, or will it just not be calculated as tax-able if it was not earned in that state? I found this difficult to get to work in the online tax software, so it seems a paper return for states may be easier.

I also had to do some reading in the California tax publications (FTB 1031 and 1032) concerning my wife's tax status for state income. Based on her moving out of state for a non-temporary / transitory purpose (3 years), I believe her income is no longer subject to California income tax since moving in August. However, her employer continued to withhold it all year, and refuses to issue a corrected W-2. In this case, do I need to call the IRS to report that, and then submit California form 3525 for the corrected W-2 amounts? Not trying to cause problems for her work (although they are being difficult with this), but don't want to pay unnecessary tax.

Appreciate any assistance!

Best,

Kevin

Carl11_2

" her employer continued to withhold it all year, and refuses to issue a corrected W-2."

That's because there's nothing to correct on the W-2. Since the employer withheld taxes for the year, the W-2 is "in fact' correct as originally issued. Changing the W-2 does not and will not change the indisputable fact that taxes were withheld - weather that withholding was correct or not.

Basically, since you file joint I am assuming the AD/MIL spouse is listed first on the tax return. Now when each tax filer has a separate HOR/SLR as their tax homes, there's two things that matter here.

- The AD/MIL member needs to be "first" on the federal tax return.

- The first state return you complete is for the person listed "first" on the federal return.

This will allow the program to take into account the taxability of each tax filer's income correctly, if the states of both tax filers do "in fact" tax personal income. The only thing I'm not sure on, is how it will deal with it since not only are both of you out of your home states, but you are also out of the country. Now if your non military spouse is working for a U.S. employer (such as AFEES) while with you stationed in another country, I do not know how state taxes for your non-military spouse is handled. I would assume that if you answer all the questions correctly, the program will deal with it just fine. But the important thing that I'm aware of, is that it does matter what state return gets completed first.

For CA, FTB Publication 1032 should help you figure out if filing joint or separate state return for CA is the way to go.

Basically, Twenty-two states require that active duty military member and his/her spouse be residents of the same state in order for the spouse to enjoy the income tax protections of the MSRRA.

Now I found what may be a halfway descent website that you may find helpful at https://www.taxslayer.com/support/2620/State-Filing-Information-for-Active-Duty-and-Spouse?language=1&page=4&q=indiana

But overall, your best bet is to make an appoint with the local base legal office for more factual information as it applies to your specific situation. As you know, it won't cost you a dime either.