State Reporting and Military Pay

[S T]

Just to be sure, for those on the board that understand the Military Pay and States

Taxpayer w/2 shows Calif and withholding

I have a taxpayer that the HLR is california, PCS to Ohio Jan til August and then a TTY in Ohio from sept - Dec 2013.

As I understand it California will not tax t/p at all due to the PCS and TTY, and Ohio will not either

Then there will be no State Tax Consequence, only the Federal

Thanks for either corrections or confirmations,

Sandy

[FEDUKE404]

CA confusion

I just read the CA "military rules" and my head is spinning.

See page 3 of https://www.ftb.ca.gov/forms/misc/1032.pdf

An individual domiciled in California when entering the military is considered to be a:
• Resident while stationed in California;
• Resident while stationed in California on Permanent Change of Station (PCS) orders and Temporary Duty (TDY) assignments outside California, regardless of the duration; and
• Nonresident while stationed outside California on PCS orders

From reading the above, it would appear that CA will tax all of the military pay except for what was earned with the OH PCS status.

I am a bit intrigued by the sequencing: Military person had PCS to OH and then, soon thereafter, had a second (TDY) assignment also in OH? That sounds kinda backwards. . .

FWIW: I was under the impression that most/many states would tax all military income (except for combat pay) for residents of their state who had entered the military. The flip side was a state could never tax a military person who was in that state as a result of a military assignment (PCS and TDY assumed). Did I miss something?

FE

[S T]

Thanks FE - now why you see why the post - yes my head is spinning

OH Dept of Taxation FAQ

2. I'm in the Air Force stationed at Wright-Patterson AFB and claim that I'm domiciled in another state (e.g. New York is the state of legal residence on my military records). Am I liable for Ohio income tax and school district income tax on my military pay?
Ohio does not tax the military pay of nonresident servicemembers, but in order to avoid a billing notice from the state, you are strongly encouraged to complete and file an IT-10 form each year when you file your federal return

From Calif Pub 1032 - PCS

Stationed Outside California – California military
servicemembers who leave California under PCS orders become nonresidents of California for income tax purposes. All income received or earned prior to
departure is subject to tax by California. After departure, only income from California sources is subject to tax by California. Nonresidents are generally not taxed by California on income from intangibles, such as dividends
from stocks or interest from bonds or bank accounts. /quote]

More Pub 1032 - TDY [quote California military servicemembers who leave California
under a TDY assignment continue to be California residents even though absent from the state

I think I am okay on not taxing either Calif or Ohio income up to August on PCS Income, then t/p was re-assigned on TDY for Re-class and Training and in Jan 1, 2014 was re-classed and re- located to OK -

Looks like the TDY might need to be taxed somewhere - thinking Calif (even though the TDY originated from Ohio ) and of course that information is not provided on the W-2 form.

Sandy

[FEDUKE404]

CA marches to a different drummer

Thanks FE - now why you see why the post - yes my head is spinning

OH Dept of Taxation FAQ
From Calif Pub 1032 - PCS

I think I am okay on not taxing either Calif or Ohio income up to August on PCS Income, then t/p was re-assigned on TDY for Re-class and Training and in Jan 1, 2014 was re-classed and re- located to OK -

Looks like the TDY might need to be taxed somewhere - thinking Calif (even though the TDY originated from Ohio ) and of course that information is not provided on the W-2 form.

Sandy

CA seems to be the red herring here. The TDY issue is a bit strange. I don't see any way that OH could tax the PCS or TDY income of the military person.

Rest assured there are many military personnel stationed in NC, and NCDOR cannot touch their military wages unless they entered the military as a NC resident.

OTOH, NC will tax "its" members of the military (whether PCS or TDY) on all military pay, regardless of PCS or TDY, except for the aforementioned combat pay. I've never heard of a distinction between the two for any taxation purposes. I would love for someone in CA to explain the logic of treating PCS/TDY military pay differently for a resident (home of record) of CA.

FWIW: When I first read your post, I thought CA had found some way to tax military personnel (HOR other than CA) on their military pay while assigned within the borders of CA. That would have cut too close to home, as a family member was on active duty in CA for almost two years.....and still was/is paying NC income tax on all taxable military income although now PCS'd outside of CA.

FE