It depends. What you will have to do is file a California return with a zero income. To do so, do not change any entries on the W2 screen. However, in the California return, use the allocation screen to report that the income in California as a nonresident is $0. This may create an e-file diagnostic that might not allow you to e-file. If this happens, you will mail in the California return with the words: MILITARY SPOUSE, RESIDENT OF OREGON across the top to receive a full California refund.
But without overriding the CA income to $0, the program will treat the amount being reported to California as taxable in California. However, you are entitled to receive a full refund of your California taxes withheld, because they were withheld in error.
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