On Nov. 11, 2009, President Obama signed S. 475, the Military Spouses Residency Relief Act ( P.L. 111-97) (the MSRRA), into law. The MSRRA amended the Servicemembers Civil Relief Act ( P.L. 108-189), retroactively to the beginning of the 2009 tax year, to provide that when a service member leaves his or her home state in accordance with military or naval orders, and the spouse relocates from that state to accompany the service member, the spouse will not be taxed in the new jurisdiction. Prior to the legislation, when the military ordered service members to move, spouses who moved with them were often subject to taxes in the new state or locality, including withholding taxes.
MSRRA does not create the right to pick and choose any state of legal residence for spouses of service members. The spouse may now align his or her residence with the service member, if the spouse previously had established residency in the same state as the service member. The alternative to aligning with the service member’s state of residence is for the spouse to become a resident of the state where the service member is currently stationed.
The following states have issued 2010 guidance for withholding on the new legislation:
The Franchise Tax Board (CFTB) has updated Publication 1032, Tax Information for Military Personnel, to include information on the legislation. The Employment Development Department (EDD) is advising spouses who qualify for relief under the new legislation to submit a new Form DE 4, Employee’s Withholding Allowance Certificate, to their employer. The form has been modified to take into account the exemption status provided by the new legislation.
Colorado FYI Tax Publication; INCOME 21 – Military Servicepersons is updated providing guidance for spouses who claim exempt wages and tips. A qualifying spouse who claims exempt may be required to provide proof that they qualify for relief. Documentation includes, but not limited to, permanent change of station documentation, prior state filing history and tax returns, voter registration, and their driver’s license of the other state.
A check box is added on the 2010 Form CT-W4, Employee’s Withholding Certificate, for military spouses who claim an exemption from Connecticut withholding (MSRRA exemption). Employees must provide their Employer with a copy of the service member’s Leave and Earnings Statement (LES) and a copy of the spouse’s non-military spouse ID.
Qualifying spouses may file Form D-4, Employee Withholding Allowance Certificate, with their employer to claim exemption from withholding.
Qualifying spouses should file an amended Form G-4, Employee Withholding Allowance Certificate, with their employer to suspend withholding on their wages. On the 2009 Form W-2, the employer should report all wages earned during the year as Georgia wages. On the W-2 for 2010 and any year thereafter, the employer should not report any of the wages as Georgia wages on Form W-2.
Qualifying spouses may file Form IL-W-5-NR, Employee’s Statement of Nonresidence in Illinois, with their employer to claim exempt from Illinois Income Tax on compensation under the Military Spouses Residency Relief Act.
INFORMATION BULLETIN #27 – Indiana Adjusted Gross Income Tax Applicable to Military
Personnel and Spouses is updated providing guidance for withholding state and county tax under the Military Spouses Residency Relief Act.
Qualifying spouses may file 2010 Form IA W-4, Employee Withholding Allowance Certificate, with their employer to claim exemption from withholding under the Military Spouses Residency Relief Act.
Qualifying spouses may file Form K-4, Employee Withholding Allowance Certificate, with their employer to claim exemption from withholding. Kansas employers should request evidence that the military spouse is indeed a legal resident of a state other than Kansas. Employers may also want to inquire with military spouses’ state of residency as to whether the Kansas employer is required to withhold income tax for that state.
Qualifying spouses may file the November 2009 version of Form K-4, Employee’s Withholding Exemption Certificate, with their employer to claim exemption from withholding.
A military spouse whose wages are exempt from Louisiana income tax may claim an exemption from Louisiana withholding tax by filing Form L-4E with their employer. Form L-4E expires at the end of the year, therefore, the spouse must file a Form L-4E each year if the spouse qualifies for the exemption. The spouse must also revoke the exemption certificate within ten days from the day the spouse no longer meets the criteria. To discontinue or revoke the exemption, the military spouse must file a new Form L-4 with their employer.
Effective beginning with the 2009 tax year, income earned in Maine by a service member’s spouse who is not a Maine resident and is domiciled in another state will not be considered Maine-source income. Previously, all income earned in Maine by a military spouse was considered Maine-source income and taxed as such. The Act does not exempt non-military income of a servicemember earned in Maine from Maine tax.
Qualifying spouses may file Form MW507, Employee’s Maryland Withholding Exemption Certificate, with their employer to claim exemption from withholding if (i) your spouse is a member of the armed forces present in Maryland in compliance with military orders; (ii) you are present in Maryland solely to be with your spouse; and (iii) you maintain your domicile in another state.
Qualifying spouses may file Form NJ-165 (revised 12-09), Employee’s Certificate of Non-Residence in New Jersey, with their employer to claim exemption from withholding. If you claim exemption under the SCRA, the state requests employees to attach a copy of their spousal military identification card to Form NJ-165.
Qualifying spouses who move to New Mexico solely to be with their spouse who is in New Mexico because of military orders may keep their out-of-state residency status and may source their non-military wages to their state of residence.
Certain restrictions apply:
The service member must have declared “legal residence for purposes of withholding state income taxes from military pay” in another state.
- The service member and the spouse must be residents of the same state.
- The service member must be in New Mexico in compliance with military orders.
- The service member’s spouse must be in New Mexico solely to be with their spouse.
Changes have been made to allow an exemption from New York State personal income tax withholding for military spouses qualifying under the Servicemembers Civil Relief Act (SCRA). Qualifying spouses may file the 2010 Form IT-2104-E, Certificate of Exemption from Withholding, with their employer to claim exemption from withholding. The MSRRA has no effect on the Metropolitan Commuter Transportation Mobility Tax (MCTMT) imposed on employers that have payroll expense within the Metropolitan Commuter Transportation District.
The North Carolina Department of Revenue (DOR) has issued both a Notice and a Frequently Asked Questions (FAQ) release on the MSRRA. The DOR notes that the federal legislation prohibits North Carolina from taxing the income earned if: (1) you are the spouse of a servicemember who is not legally domiciled in North Carolina and who is in North Carolina solely in compliance with military orders; (2) you are in North Carolina solely to be with your spouse; and (3) you are domiciled in the same state as the servicemember. With respect to the military spouse exemption, neither spouse qualifies for exemption under the Military Spouses Residency Relief Act if both spouses are servicemembers who are in North Carolina in compliance with military orders. If a servicemember is stationed in a state other than North Carolina and the servicemember’s spouse performs services in North Carolina, that spouse’s earned income is not exempt from North Carolina withholding or North Carolina individual income tax.
If an employee’s wages are exempt from North Dakota income tax because of the Act, the employee must complete Form NDW-M, Exemption from withholding for a qualifying spouse of a U.S. armed forces servicemember; attach a copy dependent military ID card issued by the U.S. Department of Defense; and, provide the completed Form NDW-M with attached copy of the military ID card to the employer.
Employers must mail or fax a copy of the completed Form NDW-M and attached military ID card to:
Attn Withholding Tax Section
Office of State Tax Commissioner
600 E. Blvd. Ave., Dept. 127
Bismarck ND 58505-0599
Or fax it to the Withholding Tax Section at (701) 328-1942
An Ohio Department of Taxation information release reminds employers that the spouse of a service member, who is domiciled in a different taxing jurisdiction and is residing in Ohio solely due to the military orders of his/her spouse, is not subject to Ohio tax on income earned for services performed or from sources within Ohio.
Qualifying spouses may file a federal Form W-4 for South Carolina purposes with their employer to claim exemption from withholding. They should write at the top of the form: “Nonresident Military Spouse for State Purposes Only”. This Form W-4 should be provided to the employer and the Department recommends that the spouse also retain a copy for his or her records.
If the nonresident non-military spouse of a servicemember qualifies for the exclusion of income from Utah tax and is paid as an employee, the spouse should give their employer a federal Form W-4, Employee’s Withholding Allowance Certificate, with the following changes to stop the withholding of Utah tax:
• Mark “Utah Copy” at the top of Form W-4, and
• Write the words “Utah Exempt” in box 7.
The employer should not withhold any Utah income tax on wages paid to the spouse.
Qualifying spouses may file the November 2009 version of Form VA-4, Personal Exemption Worksheet, which has been revised to reflect the exemption. Under the Servicemember Civil Relief Act, as amended by the Military Spouses Residency Relief Act, you may be exempt from Virginia income tax on your wages if (i) your spouse is a member of the armed forces present in Virginia in compliance with military orders; (ii) you are present in Virginia solely to be with your spouse; and (iii) you maintain your domicile in another state.
Qualifying spouses may file Form WV IT-104, Withholding Exemption Certificate, with their employer. They must also attach a copy of their “spouse military identification card” to Form WV IT-104.
Qualifying spouses should file Form W-221, Nonresident Military Spouse Withholding Exemption, with their employer to claim exemption from withholding.
A spouse of a servicemember may be exempt from Wisconsin income tax on wages performed in Wisconsin if (1) the servicemember is present in Wisconsin in compliance with military orders, (2) the spouse is in Wisconsin solely to be with the servicemember, and (3) the spouse maintains a domicile (legal residence) in another state.
Send a copy of the completed form to:
Wisconsin Department of Revenue
Office Services MS 5‑144
PO Box 8906
Madison WI 53708‑8906