Unfortunately if her employer withheld state income tax in the wrong state, she will need to file a nonresident state income tax return in that state in order to get a refund of these erroneous state tax withholdings.
If she is covered under MSRRA, she will only file taxes in your state of legal
residency (SLR).
In
order to get the full refund of her NC state income tax withholdings, she will
need to file a nonresident NC return but report zero "0" income from
NC (even though she does have NC wage income). She must mail in this NC
nonresident state income tax return and include her state W-2 information. She
will want to include an explanatory statement with her NC return stating her
situation (that her NC employer withheld NC state income taxes from her wages
in error because she is a military spouse and covered under MSRRA).
You
can add a state under the state taxes tab in TurboTax.
