No taxes were withheld from her income on the W-2
My daughter noted (example 5 is the one she thinks applies):
Military Spouses Residency Relief Act (MSRRA) (Public Law 111‐97)
1. Background. The MSRRA changes the basic rules of taxation with respect to military spouses who earn income from services performed in a State in which the spouse is present with the Service member (SM) in compliance with military orders when that State is not the spouse's domicile (legal residence). Under these conditions, the spouse generally will not have to pay income taxes to the current State where income is earned. The spouse, however, would be required to pay income tax to the domiciliary State (assuming that State taxes wages).
5. Example: Spouse and SM are domiciled in Texas. SM is reassigned from Texas to Virginia and spouse accompanies SM to Virginia. Prior to the MSRRA, the spouse would have to pay State taxes on income earned from services performed in Virginia, but under the MSRRA, the spouse would not have to pay income tax to Virginia. The spouse, would, however, have to comply with the tax laws of the State of domicile, in this example, Texas. Because Texas has no State income tax, the spouse would pay no State income tax. Had the spouse’s domicile been a State with an income tax, then the spouse would have to pay State income tax to that State, even though the income was earned in Virginia. Should the spouse voluntarily remain in Virginia after the SM subsequently transferred outside of Virginia under orders authorizing the spouse to accompany the SM, then the spouse would lose the protections of the MSRRA and would be required to pay income tax to Virginia.
