Discussion:Military Filers - Husband from Arizona and Wife from Michigan

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Advanced Tax Questions --> Military Filers - Husband from Arizona and Wife from Michigan

Discussion Forum Index --> Tax Questions --> Military Filers - Husband from Arizona and Wife from Michigan

BMA (talk|edits) said:

17 February 2009
I have a client who are both in the armed forces and stationed overseas. One is an Arizona resident, the other is a Michigan resident. Do they need to file a state tax return separately? Or could they claim Arizona or Michigan as the state of legal residences and file a joint return? If they could choose between the two states, which state could they choose that would be more beneficial for them? They are filing a joint return for the federal.

Taxea (talk|edits) said:

17 February 2009
IRS has a military taxpayer publication taxea

Riley2 (talk|edits) said:

18 February 2009
State of residence is not a multiple choice question.

However, I seem to recall that active-duty pay is excluded under both Arizona and Michigan law.

Ddoshan (talk|edits) said:

18 February 2009
Generally each would remain a resident of the state from which they entered the service. Unless positive steps were taken to change.

BMA (talk|edits) said:

19 February 2009
The taxpayers were married last year, both in the military. The husband's w-2 is showing Arizona as the state of residence with about $135 state income tax withheld. The wife's w-2 is showing Michigan as the state of residence with no state wages. Could they file jointly for federal and separately for state? If the law excludes military pay, why was Arizona state tax withheld for the husband?

Ddoshan (talk|edits) said:

19 February 2009
Yes they can file jointly for Federal. States have different rules in regards to taxability of military pay. Arizona may tax military pay. You would have to read their rules.

TTMM (talk|edits) said:

19 February 2009
Arizona has a really well thought out ITR on this subject. It takes you through the calculation when one taxpayer is in a community property state and the other is not. I don't have time to look for it right now. But if you go to www.azdor.gov, then rulings & publications and then look through the ITRs (individual tax ruling) you will find it. It is several years old but it's still the rule.

KatieJ (talk|edits) said:

19 February 2009
I wrote a long response to this yesterday and lost it, alas. Anyway, each spouse remains a resident of the state where he or she was domiciled at the time of enlistment. This is the "home of record" on the military records, and is generally used by the states as a convenient proxy for domicile. Michigan and Arizona are both states that consider active duty military personnel to remain residents for tax purposes until they establish a new domicile somewhere else.

I believe the ITR that TTMM referred to is here: http://www.azdor.gov/ResearchStats/rulings/itr97-3.htm. It doesn't apply in this situation; it has to do with the taxation of an Arizona resident spouse's community 1/2 of the military compensation of a nonresident spouse who is domiciled in another community property state. It doesn't contemplate the opposite situation, where the nonresident spouse of an Arizona resident military member (absent the federal law) would be subject to Arizona tax on his or her community 1/2 of the Arizona resident's military compensation. That's a more interesting question, actually -- would the nonresident spouse's 1/2 of the Arizona resident's military compensation therefore be exempt from Arizona tax, because it belongs to a nonresident, and the federal statute precludes the state's taxation of a nonresident spouse's community 1/2 of military compensation?? The question is interesting but academic, since Riley's recollection is correct: Both Arizona and Michigan exempt active duty military compensation. Ariz. Rev. Stat. Ann. §43-1022(19); Mich. Comp. Laws Ann. §206.30(1)(e).

TTMM may have been referring to this ruling, http://www.azdor.gov/ResearchStats/rulings/itr93-20.htm, and this one, http://www.azdor.gov/ResearchStats/rulings/itr95-2.htm, which are more useful. If there is any Arizona source community income, half of it belongs to the Michigan resident spouse, who therefore is an Arizona taxpayer. As ITR 95-2 explains, spouses one of whom is a resident and the other a nonresident can file a joint return on Form 140NR. The nonresident spouse's non-Arizona source income will not be subject to Arizona tax.

If you file a joint federal return, you must file jointly in Michigan. The nonresident spouse's non-Michigan source income will be backed out on Form MI-1040 Schedule NR.

JAInVA (talk|edits) said:

6 May 2009
KatieJ: Thank you so much for the information you provided. I have a similar situation-husband is active military, stationed in Texas. He and his wife bought a house in Arizona in 2008 where the wife is now working. They questioned me when I told them they needed to file a state return, so I did some research, and decided to come here to see if anyone had encountered a similar situation. You gave me the guidance I needed to properly complete the couple's returns. Bless you!

To join in on this discussion, you must first log in.
Personal tools