Help with CO return

[Possi]

I love the military. I really do... but we need a rule book that states very clearly how to deal with military and state returns. TMI, could you do this for us? And not the "State book" that we pay for. I have that. It is not precise.

I have a couple from CO.

He is a military active duty CO resident, stationed in VA all year.

I understand from the State book, that he is a CO resident, that I should file him as a full CO resident, subject to CO tax. His wife is a VA resident, but I think I have to use the same filing status as the federal, and somehow get her VA income out of there.

This appears clear to me, and would have been, if HRB had not done the return last year, zeroing out his CO income and getting a full refund of his withholding.

Who is right?

[Burke]

I think you are correct in that he remains a CO resident. However, is his spouse really a VA Resident, or does she fall under the Military Spouse exception? Did they marry in CO and she travel to VA as his spouse? If so, she is also a CO resident, and should not be paying VA taxes. If she was a VA resident prior to marrying him, and they married in this state, then yes, she is still a VA resident and does pay VA taxes. She files a separate return in VA for her income earned here, and he is a CO resident, she is a CO non-resident. I think Form 104PN will exclude her income on the CO return.

[Possi]

VA resident

No, she really is a VA resident. From VA and never lived in CO.

CO taxed the percentage of income that was truly CO income. I completed a CO PY/NR return and was able to split that income out.

So HRB did it wrong. And these kids are going to have to pay it back with interest.

On one hand, I'm glad I was right. OTOH, I'm sad for them. I'm sure HRB will make it right for them.

He made an interesting statement. He is glad that his family (his parents) moved to FL, because now he can claim FL as his home. He never lived there. Say WHAT?

[FEDUKE404]

Playing the home of record military game

No, she really is a VA resident. From VA and never lived in CO.

CO taxed the percentage of income that was truly CO income. I completed a CO PY/NR return and was able to split that income out.

So HRB did it wrong. And these kids are going to have to pay it back with interest.

On one hand, I'm glad I was right. OTOH, I'm sad for them. I'm sure HRB will make it right for them.

He made an interesting statement. He is glad that his family (his parents) moved to FL, because now he can claim FL as his home. He never lived there. Say WHAT?

I smell a rat. For a military person, home of record when entering the service stays with the person throughout active duty. In most cases (as referenced here), the person continues to pay state taxes to his "original" state throughout his military career, regardless of where he is on active duty. The flip side is he cannot be taxed on military pay by a state in which he is merely stationed. A spouse is entitled to the same treatment, if the spouse is accompanying the service person.

It is possible for an active duty person to change his home state, but the military is no dummy and requires all kinds of sworn statements to be on file to prove a real "home" has changed. Otherwise, our entire military population would likely be from FL or TX or the others with no state tax. Oh yes: some of the states are now also quite aggressive at "asking some questions" of someone who entered the service as a state resident and then somehow changed the map.

The situation here is a bit sticky as it is a bit unclear to me whether it was a CO or a VA wife, and the timing of when they got married (who was living where). You probably will need to do a bit more research to nail down those guidelines. (And some here on TTB routinely work with large numbers of military personnel. Listen to them!)

But, as to my original point, be very careful about anyone espousing some tax tricks that might get you into some very warm water!

FE

[Possi]

this year is correct

I have a lot of military clients. but I have never had one make a statement like that before. He would have to be stationed in FL and live in FL and claim to intend to go back to FL when he retired in order to change his tax home of record. I think he is the naïve one. I know better, but does the military allow people to do that? Just because his family moved to FL, and I don't mean his kids, I mean his parents... I know that wouldn't allow him to change. It is ridiculous. But stranger things have happened.
The spouse is indeed a VA resident. When they move to CA, and she qualifies for the spousal exemption to CA, would she still have to pay tax to VA? I don't think so.

[Burke]

Well, the military used to do these things routinely. I had a military client who left VA and was stationed in AK. They put that on his W-2, and although he has been in LA, AZ, HI, and all over the place (mostly deployed in Afghanistan), his W-2 still has AK on it. Then I had another one who actually moved to TX, married there, bought a home there and lived there for 12 years. He voted there, paid taxes there (cars, real estate, etc) and he still claims his home state as TX.