A new law signed recently by President Obama may have certain employees knocking on your door with state tax questions.
The Military Spouses Residency Relief Act (P.L. 111-097) exempts from income tax any spouses of military personnel who move into a state to be with the service member.
Any income the spouses earn for services performed in a state will be exempt from state withholding.
That means the spouses won’t have to file an income tax return in the worked-in state because prior residency applies. No doubt some of the affected employees will come to you, confused about how they can adjust their withholding. Here are some important state updates that’ll help you answer their questions:
ALABAMA – To claim the withholding exemption for military spouses, employees must attach Form DD-2058 to Form A-4.
CALIFORNIA – The state revised Form DE 4, Employee’s Withholding Allowance Certificate, so military spouses may claim exempt from state tax withholding.
Cite: www.edd.ca.gov/pdf_pub_ctr/de4.pdf
DISTRICT OF COLUMBIA – A spouse of a service member whose wages are exempt from the District’s income tax under the new law may file a D-4 with their employer to claim exemption from withholding.
Cite: http://newsroom.dc.gov/show.aspx/agency/otr/section/2/release/18797
ILLINOIS – A spouse’s state of residence does not change when he or she moves to a new state because the service member is stationed there.
Cite: http://www.revenue.state.il.us/taxforms/IncmCurrentYear/Individual/Schedule-MR.pdf
IOWA – You’ll want a new copy of Form IA W-4. It’s been revised to allow military spouses to claim exempt.
Cite: www.iowa.gov/tax/forms/44019.pdf
KENTUCKY – For 2009, military spouses who fall under the federal law should file Form 740-NP, Kentucky Individual Income Tax Nonresident or Part-Year Resident Return, to request a refund of the Kentucky income tax withheld from his or her 2009 pay. The income would not be reported as taxable on the Kentucky income tax return. For 2010, military spouses should file a new Form K-4 with his or her employer to claim the exemption from withholding of state income tax.
Cite: http://revenue.ky.gov/Hot+Topics/AddHT.htm
LOUISIANA – Military spouses must file a new Form L-4E at the end of every year if they qualify for the exemption.
Cite: http://rev.louisiana.gov/forms/lawspolicies/RIB10006.pd
MARYLAND – The wages earned by a spouse of a nonresident service member may be exempt from state income tax under the Military Spouses Residency Relief Act, when the spouse isn’t a legal resident of Maryland. The exemption may be claimed by filing a revised Form MW507 with the employer.
Cite: http://individuals.marylandtaxes.com/incometax/military/default.asp
MASSACHUSETTS – The state’s following the federal Military Spouses Residency Relief Act.
NEW YORK – The payroll expense of a covered employee/military spouse must be included when computing the Metropolitan Commuter Transportation Mobility Tax. [Department of Taxation and Finance, TSB-M-10(1)(l); TSB-M-10(1)MCTMT, 1/11/10.] Also, Form IT-2104 has been revised to allow military spouses to claim exempt from state tax withholding.
Cite: http://www.tax.state.ny.us/pdf/2010/fillin/wt/it2104e_2010_fill_in.pdf
NORTH CAROLINA – The Department of Revenue is updating forms, publications and other tax info to provide guidelines. The NC-30 and Form NC-4 have been revised.
Cite: http://www.dor.state.nc.us/taxes/individual/armedforces/spouses.html
NORTH DAKOTA – You should continue withholding state income tax from the wages you pay military spouses. The state will develop forms to use for the exemption.
Cite: http://www.nd.gov/tax/indwithhold/pubs/specialedition.pdf
VIRGINIA – A spouse whose wages are exempt from state income tax under the Servicemember Civil Relief Act may claim an exemption from Virginia withholding tax. The state revised Form VA-4.
Cite: http://www.tax.virginia.gov/Documents/Military Spouses Residency Relief Act Tax Bulletin.pdf
