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About a dozen military personnel I prepare taxes for are confidently under the impression that they can elect any state they want as their filing state. Am I missing something?

msl217
Level 1

Most of these clients are showing FL or WY as box 15 on their W-2's from the Navy/Army. They will get absolutely crushed with taxes if we accurately adjust where they are currently living, but I do not see an alternative.

My understanding is that when enlisted, you have a state of legal residence, as well as a home of record (HOR)...

The only thing I have read is from "military.com" (not the IRS website) stating "Generally speaking, military personnel are subject to tax in their "home of record," which is the state where they resided at the time of their enlistment or commissioning."

Thanks in advance guys. First post on here so not really sure what kind of activity it will get.

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28 Replies 28
sjrcpa
Level 15

The military people know what they are doing. Their wages are not subject to tax in the place where they are stationed. Taxable to their home of record - and mostly that will be a nontax state.


ex-AllStar
The-Tax-Lady
Level 8

I have seen many errors on the Military website and when I contacted them, I was told they are not tax advisors and the information posted is merely that, informational, even if it is wrong. I believe this is where that oxymoron, "Military Intelligence" is applicable.

As sjrcpa said, a servicemember does not pay State tax if he is not stationed in his home State.

Each State is different in how they tax Military pay. Ohio, for example, has a special IT- 4 Withholding form for the military which excludes any State or School District tax withholding when stationed outside of Ohio. 

Review the State regulations for where your clients call home.

msl217
Level 1

Got it. The state by state piece (duh, whats wrong with me) is what I was missing.

 

Per NYS website: "If your permanent home was not New York State when you entered the military but you were assigned to duty in New York State, you do not become a New York State resident even if you have a permanent place of abode here. You are a nonresident and your military pay is not subject to New York State income tax."

Follow-up question, if you do not mind: the client's HOR is Florida. He moved to NYS for a W-2 job, not for military purposes. He still performs duties for the Navy, though when he performs those duties he travels to a different state.

 

Does that make this any less clear in your view?

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sjrcpa
Level 15

So is he still in the military or not?

The military exclusion does not apply to civilian employees.

The nonmilitary wages will be subject to NY tax.


ex-AllStar
msl217
Level 1

He received:

1). W-2 wages for about $80,000 from the US Military. The employer's name is listed as "DFAS" (Defense Finance and Accounting services). There are no FICA wages on his W-2. Box-15 shows FL. He was told by DFAS that it was in his best interest to have them put FL as his HOR for military wages.

2). W-2 wages for $80,000 from the hospital he works at in NY (medical resident). The employer is the hospital. The W-2 shows no SS wages or taxes, but it does show Medicare wages and taxes. Box 15 shows NY, with 16-20 filled in.

He is still in the military.

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The-Tax-Lady
Level 8

No worries, it's not easy remembering everything in a tax season that the rules are changing daily.

When you say he moved to NY for a W2 job, did he get a NY Driver's license as a resident or is the job temporary. Either way, NY is probably due some tax on that job. His current military pay sounds like it could be subject to NY tax if he is now a resident of NY and not just stationed there.

 

msl217
Level 1

He is a medical resident (3 year residency). This will be his last year in NY. He did get a NY license.

Per my other reply:

He received:

1). W-2 wages for about $80,000 from the US Military. The employer's name is listed as "DFAS" (Defense Finance and Accounting services). There are no FICA wages on his W-2. Box-15 shows FL. He was told by DFAS that it was in his best interest to have them put FL as his HOR for military wages.

2). W-2 wages for $80,000 from the hospital he works at in NY (medical resident). The employer is the hospital. The W-2 shows no SS wages or taxes, but it does show Medicare wages and taxes. Box 15 shows NY, with 16-20 filled in.

He is still in the military.

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qbteachmt
Level 15

DFAS did the full SS deferral; they are collecting it in 2021 along with 2021 amounts. That doesn't mean anything to your issue here.

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The-Tax-Lady
Level 8

Hospital is probably connected to the State retirement system, which is why there are no SS wages or withholding and the military has their own retirement system also.

Are you filing him as a non resident of NY, but still liable for taxes on income earned in NY?

His military earnings, I believe, would still be exempt from NY taxation, because his residency is temporary and not related to his military service requirements.

Hopefully someone with more experience in this area and NY regulations will respond to this post and confirm or correct what I believe. NY is a bit crazy so you want to get it right the first time,

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msl217
Level 1

Yes, filing him as a non-resident of NY, resident of Florida. NY does ask if he had living quarters in NY, which is the only part tripping me up.

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msl217
Level 1

The challenge is that half of his income is subject to NYS tax:

 

"As a nonresident, your military compensation is not subject to New York State income tax. However, other income that you receive from New York State sources may be subject to tax."

As of now, my plan is to file him as a part year resident of NY, part year florida resident. Wold love some feedback

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qbteachmt
Level 15

"Wold love some feedback"

Look at what is on the W-2. You identified that one is FL and one is NY. Why not just go with what got reported?

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msl217
Level 1

I'll file as reported--still need to choose resident state however

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qbteachmt
Level 15

"still need to choose resident state however"

Find out which State the person used for voting.

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qbteachmt
Level 15

This is a duplicate and will be marked for deletion. Your original, being answered, is here:

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/proseries-support/00/14...

 

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qbteachmt
Level 15

@LPTaxServices 

You asked this in multiple places. Here is the answer:

"Why is the return now showing as changed and removing the EIP payments?"

That's a different issue entirely. Read this announcement:

https://proconnect.intuit.com/community/proseries-tax-news-updates/discussion/proseries-2020-produce...

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qbteachmt
Level 15

This is a duplicate and will be marked for deletion. Your original, being answered, is here: https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/proseries-support/00/14...

 

 

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qbteachmt
Level 15

"He still performs duties for the Navy, though when he performs those duties he travels to a different state."

Enlisted or as a contractor? "In the military" isn't the same as "performs duties for the Navy."

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msl217
Level 1

Also, laughed audibly at the first paragraph 😂

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BobKamman
Level 13

What you may have is a specific situation in which the Navy pays for medical school in return for a commitment to continue service in the Navy.  Medical school requires a residency, which the military cannot provide.  So he is still in the Navy, but completing his requirement for the M.D. by working for a non-military employer.  Have you asked him, if that's what happened?  Otherwise we are all blind people trying to describe an elephant.  

If he is a resident, then he is a nonresident.  Which is to say, if the purpose for his working in a New York hospital is to complete his Navy-financed education, then he did not become a New York resident.  

qbteachmt
Level 15

"Have you asked him"

Oh, wow. Great idea.

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msl217
Level 1

The Navy is not paying for his medical school. He has two separate W-2's: the Navy, and the hospital where he is doing his residency. Because his Home of Record with the Navy is Florida, the income he receives from the Navy he owes only Federal and Florida ($0) tax.

"As a nonresident, your military compensation is not subject to New York State income tax. However, other income that you receive from New York State sources may be subject to tax."

That above line from NYS is the challenge. The only way (that I am aware of) in Pro-Series to not subject your income to NYS taxes is to file as a non-resident of NY. However, the income he receives from the hospital has to be treated NYS income (he lived and worked there), as only military compensation gets unique treatment here.

I currently have him setup in ProSeries to file as a part-year resident of NY (apportioning the months he lived there to the income needed to be taxed by NYS) and a part year resident of FL (apportioning the months he lived there to the income needed to be taxed by NYS). 

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sjrcpa
Level 15

I think you're in danger of blowing the FL residency. NY nontaxability of military wages if you file as part year NY resident.

Going down your path he will be a NY resident for 2021.


ex-AllStar
rbynaker
Level 11

@sjrcpa wrote:

I think you're in danger of blowing the FL residency. NY nontaxability of military wages if you file as part year NY resident.

Going down your path he will be a NY resident for 2021.


I agree with Susan.  Filing a NY PY resident return likely shows intent to change residency.  I would file a NY NR return.  I don't know that you can get around NY tax on NY source income even with Military Residency Relief.

BobKamman
Level 13

He's in the Navy.

And he's paying for his own medical school.

A likely story.  You have his 1098-T statements, and student loan interest?

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msl217
Level 1

He finished Med School 5 years ago. He has been doing his residency since. He enlisted in the Navy last year. 

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rbynaker
Level 11

Okay, time out.  Sounds like he was a NY resident when he joined the Navy.  So where does FL come in to the picture?

The-Tax-Lady
Level 8

I'd file him as non res for NY with the total income, and look how to exclude his military money within the NY return, if the software doesn't do that automatically. NY will take what they want for regular wages earned there by a non resident.

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