Tax Home Guidance Please

[thomtax]

Have a client that worked at an Afghanistan Military Base for a defense contractor. She signed up (W4) with her home being the home of her father in Arkansas and Arkansas being her residence. For one month, the company withheld Arkansas tax. Then they informed her that because of where the company headquarters is located, they must change her withholding from Arkansas to Maryland, which was the way the rest of the year went.

My question:
Can I continue to use Arkansas as the tax home and show Maryland as a non-resident tax return. Or, do I have to change her tax home to Maryland, because of the company's handling of things and file PY for each state, even though she was never in Maryland in 2011.
(Not that I think it matters to this situation, but the W2 is issued from a company name in Florida which actually hired her.)

Using the search function on IRS, nothing comes up. The only references in TTB that I have found primarily refer to travel expenses to and from actual home and tax home. None of that applies here.

Have any of you run into this situation before?

Thanks for any guidance.

LT

[Burke]

Her tax home is where her principal place of business/employment is. Therefore, it is neither Arkansas nor Maryland in my opinion. She is not military, but civilian per your post, and I believe she would be liable for taxes in neither state for the period of time she is overseas. In fact, she should qualify for exclusion of foreign earned income if she meets the time test.

[MAMalody]

I would go with Burke, assuming she was there for over a year.

[ChEAr$]

I would go with Burke, assuming she was there for over a year.

Arkansas won't like that idea. Everybody overseas is from some state regardless of being out of country more than a year.

[Gary2]

Tax home and domicile are two different things. I agree with Burke that her tax home is neither Arkansas nor Maryland. However, her domicile appears to remain Arkansas, which will want to tax her on all her income.

I don't understand why they employer thought they had to change her withholding. I could understand refusing to withhold for Arkansas if they have no presence there, but that shouldn't require them to withhold for Maryland. I suppose it's possible there are some weird rules concerning overseas work.

[taxea]

Tax home is defined at the bottom center column of page 2 of the 2106 instructions.