Discussion:Multi-State Returns

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Discussion Forum Index --> Advanced Tax Questions --> Multi-State Returns

Discussion Forum Index --> Tax Questions --> Multi-State Returns

BARBOLEARY (talk|edits) said:

12 May 2008
I have a multi-state question.

I have a new client. His wife his active duty military, resident of Michigan, stationed in VA. He is retired military and a resident of AL. He tried to get work in VA and worked for @ 3 weeks in May 2007.

Since he couldn’t find any other work at that time in VA, his previous employer in AL had work so he went back and worked for @ 2 months.

He came back to VA and started a full-time job IN mid-August, but they withheld MD taxes. VA State law says that if a nonmilitary spouse lived in VA for less than 183 days, they would file a Nonresident return. He was here for 133 days, which should qualify him to file as a nonresident.

Does the following sound correct in what I am wanting to do?

File Federal as MFJ with spouse. File VA NR return for the three weeks he worked in VA. File MD NR for the income that should have been taxed in VA. File AL resident and put his AL income and the military pension on it.

TheTinCook (talk|edits) said:

12 May 2008
To add to the confusion, some states have an option to treat a NR spouse as a resident. Gotta take that into account when you're running the numbers as it impacts the other state credit.

Newtaxguy (talk|edits) said:

May 12, 2008

Sounds like you're saying that the MD taxes were withheld erroneously cuz you're not showing anybody working or living in MD.

That's probably the first problem you have to solve. The co that withheld MD taxes should fix the w2, and make sure withheld taxes go to VA, not MD.

BARBOLEARY (talk|edits) said:

12 May 2008
Yes, you are correct, they live in VA, not MD. The client has already requested that the W-2 be corrected, but with no success.

KatieJ (talk|edits) said:

14 May 2008
It is too late to change the W-2; you can't move the withholding from one state to another. The client must file a nonresident MD return to get the MD withholding back.

All of the client's VA earnings are subject to VA tax, including the earnings on which MD tax was withheld. All of his income, for the entire year, is subject to AL tax if his domicile remains there. AL law makes no provision for a domiciliary to be a nonresident under any circumstances; in order to change domicile, he would have to move away from his AL home and move to VA with the intention of remaining there indefinitely. If the military spouse is in VA on PCS (permanent change of station) orders, and he has left his AL home with the intention of making his home with her, he is a part-year resident of AL and a part-year resident of VA. However, if her orders there are temporary, even if he has given up his AL home he is still an AL domiciliary resident because he has not established a new domicile.

Assuming the client's domicile has not changed, these are the returns you need to file for him:

A nonresident MD return to claim a refund of the erroneous withholding.

A nonresident VA return to report ALL of his VA source income -- not just the 3 weeks in May, but also the earnings from August on.

A resident AL return including all income, from all sources, including the VA income. AL will give him credit for the tax he pays to VA, limited to the proportion of his AL tax liability that relates to that income.

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