CA Military Spouses

[RLymanC]

just announced by from Spidell Publishing

Military spouse's income may be tax-exempt (11-18-09) I put CA spouses, looks like all states.

Beginning with the 2009 taxable year, states may not tax wage and personal service income of a military spouse if the spouse has the same domicile or residence as the servicemember and:

The military spouse chooses to retain his or her domicile in the home state;

The military servicemember is stationed in a state other than his or her domicile; and

The spouse is absent from his or her domicile to join the active duty servicemember spouse, who is at a military duty station under military orders.

This federal preemption means that qualified spouses are not taxed by California on wage and certain other income, and may immediately stop California income tax withholding on California wages and may stop making estimated tax payments on income from services. Note: Any nonmilitary pay of the military servicemember continues to be taxable.

This new law is a result of the federal Military Spouses Residency Relief Act (P.L. 111-097) signed by the President on November 11, 2009.

Both the FTB and the EDD are working out filing details.

[travis bickle]

Is this correct?

. . . .This federal preemption means that qualified spouses are not taxed by California on wage and certain other income, and may immediately stop California income tax withholding on California wages and may stop making estimated tax payments on income from services. Note: Any nonmilitary pay of the military servicemember continues to be taxable.

This new law is a result of the federal Military Spouses Residency Relief Act (P.L. 111-097) signed by the President on November 11, 2009. . . .

(emphasis added)

I have reviewed this bill online, but I am beginning to wonder if I am reading properly.

According to this, if a non-resident of California [and maybe more states] is in the military and is stationed in California and has a part-time job stocking grocery shelves in California, that income is taxable to California because it is California-sourced income BUT if that person's spouse had that very same job [and same residency/domicilary situations] that income now becomes non-taxable to the state?

What am I missing here?

[RLymanC]

Non-Military

According to this, if a non-resident of California [and maybe more states] is in the military and is stationed in California and has a part-time job stocking grocery shelves in California, that income is taxable to California because it is California-sourced income BUT if that person's spouse had that very same job [and same residency/domicilary situations] that income now becomes non-taxable to the state?

For some reason they don't want the service personel making extra money without paying taxes. I read it the same way you do, I'll look into it somemore.

[Davc]

(emphasis added)

I have reviewed this bill online, but I am beginning to wonder if I am reading properly.

According to this, if a non-resident of California [and maybe more states] is in the military and is stationed in California and has a part-time job stocking grocery shelves in California, that income is taxable to California because it is California-sourced income BUT if that person's spouse had that very same job [and same residency/domicilary situations] that income now becomes non-taxable to the state?

What am I missing here?

The same thing as the rest of us. Intelligent, hard working, responsible, and ethical representation in the federal legislative branch.

[Nashville]

I'm missing something

If a military spouse's civilian income remains taxable, what is really new?

Nothing. If the military spouse had military income it would be subject to the same non-taxability features as the other spouse.

If I'm reading this correctly, then nothing has really changed.

It is difficult to become a career military person without an assignment in a non-tax state such as Texas or Florida. Both of those states are dripping with military bases seemingly around every corner. An assignment, for example, in Texas, entitles that enlistee to choose to be a Texas resident for the remainder of his military career. If he is assigned to Ft. Dix (NJ) or Ft. Drum (NY), saves him $$$Thousands$$$ in state taxes.

[Lion]

Not taxable to state

The spouse's income will now be NOT taxable to the state if she works in the state his/her military spouse is stationed in while they maintain a different state as resident state. Making it easier for spouses to follow their military person.

[Burke]

This is true. The spouse's income (from whatever source) will not be taxed in the state in which he/she lives IF the only reason he/she is there, is to accompany a military spouse who is stationed in that state, AND said spouse retains his/her residency in their home state. Whether they live on or off base does not matter. HOWEVER, it will mean that the "home" state will want them to continue to file and pay taxes there, unless they maintain their home residency in a state which has no income tax. I would assume this to mean that said spouse will keep their former resident state's driver's license, perhaps car tags, and to continue to vote in that former resident state (to give a couple of examples) if they want to claim residency in said former state. If they came from Tennessee, all is okay. However, if he/she came from NC, they cannot suddenly determine that they are TN residents to avoid state income taxes.

[Nashville]

Okay, but...

Looks like the bizarre illustrative example above applies: Texas T-TommyGun's wife works at the five and dime at Camp LeJeune NC, so she, maintaining a Texas residency, is exempt from NC taxes. However, T-Tommy gets a job at the same five and dime, NC gets to tax his pay.

I am in favor of people paying as low taxes as possible, but when is this Santa Claus mentality going to end? With a Trillion Dollar deficit (not just in total, but every year now) who is going to lend the government money so they can earn interest at a whopping 0.25% prime interest rate??

[Snaggletooth]

Employer's Responsibility

Without regard to whether the spouse [is, is not] subject to state taxation, what is the responsibility of the employer to withhold? The individual' responsibility and the employer's responsibility is often two different things.

Example: Paula works as a receptionist at Beaver Drilling and Trenching at Edwards AFB in California. Her husband is enlisted in the Air Force. Both she and her husband are from Ft. Wayne, IN and claim Indiana as their home residence. They have maintain Indiana drivers' license and car tags.

Beaver Drilling and Trenching is a commercial contractor, much of their work is done at Edwards. Their payroll system consists of SIT capabilities with two options 1)withhold California tax, or 2)withhold nothing.

The new law now says that Paula is not taxable under California state tax, but she IS taxable under Indiana law. My question: Is Beaver Drilling now responsible for withholding Indiana tax?? I don't believe the New Federal law specifies so, although it does specify that Paula is subject to Indiana tax.

[RLymanC]

Snag

Quote:"The new law now says that Paula is not taxable under California state tax, but she IS taxable under Indiana law."

Not so, under the new law she is exempt from all 50 state taxes..Spidell is the CA tax quru, thats why he just deals with CA issues, but the law includes all states.

[Snaggletooth]

Thanks

..RLyman for clarifying this tenet..

After reading the new law as passed (only three pages), I'm not sure I agree with you, or that I disagree either.

It does state that the spouse cannot be deemed to enter a tax jurisdiction by virtue of the military assignment, but also that the spouse cannot be deemed to LEAVE their domiciled jurisdiction either. If their domiciled state has a state income tax, then it would appear that the service spouse still has a requirement to file and incur tax under that domiciled state...

[Snaggletooth]

2009 taxes withheld

The spouse's income will now be NOT taxable to the state if she works in the state his/her military spouse is stationed in while they maintain a different state as resident state. Making it easier for spouses to follow their military person.

If I understand it correctly, a military spouse who has had state taxes withheld through November of 2009 is entitled to a refund.

File a non-resident return in the stationed state, showing zero wages as income for that state and claim a refund for all the money withheld in 2009. The act specifies the tax period which CONTAINS November 11th, that means the spouse is exempt all year long.

In order to successfully file for a refund, the spouse will have to have a W-2 showing no taxable wages. That means all affected employers are going to have to get on board by the time W-2s are issued. Fat chance.