Under MSRRA, your wife is not subject to CA tax while you were on active military duty. If she is an employee, and CA tax was withheld, she will have to file a CA return to get a refund. She worked in CA all year so this does not apply. Since you (and she) are residents of AZ, you will have to file a state income tax return there.
Form 140 is an AZ Resident Personal Income Tax Form filed by resident taxpayers. You may file Form 140 only if you (and your spouse, if married filing a joint return) are full year residents of Arizona or if Your Arizona taxable income is $50,000 or more, regardless of filing status.
Thank you for your service.
