Military spouse and state taxes

[z5levi]

Alrighty... So here is a sticky situation that I'm hopeful someone can give me a hand with. I'm active duty and married. My home of record is Michigan (where I enlisted and lived prior to the military) and my wife and I both live in Indiana on orders. I've gone ahead and filed my state and federal returns as of yesterday. I also paid Indiana what turbo tax said I would owe from what my wife was taxed. Her job in Indiana wrote tax information in her W-2 which, when I entered that information in my wife's return, she then ended up with a sizable debt to Indiana. As a side note, I believe since we are filing a joint return Indiana also taxed her for our combined income and that is why turbo tax said she now owes money.

Today, my return was declined and kicked back to me because of my residency selection. To make maters worse, I also paid Indiana what turbo tax said I owed when I filed yesterday before my return was declined. I believe that payment is now in error. I believe this because my home of record is again Michigan. That being said, we both have Florida licenses since we've lived there for the last decade prior to PCSing to Indiana. We also own a house in Indiana. 

So my questions are:

1. How do I get my money back from Indiana if the tax debt was in error?

2. With a Florida license and owning an Indiana property, do I really put Michigan as my home of record for my wife and I? 

3. What happens with the Indiana state taxes that were on my wife's W-2 if I change our residency to Michigan? I had it set to Indiana since that is where we currently live...

4. But seriously, if we're not paying Indiana state taxes even though her W-2 was taxed by Indiana, how do I get the payment that I've already made to Indiana back???

Thanks all! 

[DanielV01]

I'm going to start with your second question first.  Your HOR is Michigan.  That is what your residency was when you entered into the service, and unless you change your SLR through an approved Form DD 2058, it continues to be your tax home.  (You might have had an opportunity to switch your SLR to Florida previously while you had a home, driver's license, etc. in Florida, but that will be a harder sell now.  Had you been able to take advantage of this, your wife would also be able to be a Florida resident and not pay state taxes at all).  

Because your HOR is Michigan, at the very least your state of residence is not Indiana.  Your wife's state of residence shouldn't be Indiana either.  It either definitely is Michigan or you can elect for it to be Michigan, which will simplify your taxes going forward.  (It definitely is Michigan if she shared Michigan residency with you at any point in time, no matter what state she's from).  

If that election is made, then you and your wife should file an Indiana nonresident return.  (Because of the military spouse situation, you wouldn't file a nonresident reciprocal return even though Indiana and Michigan have a reciprocal agreement.  That agreement doesn't matter when the Military Spouse provision is used; the income is not taxed in the state where you are stationed, period).  

Filling out the Indiana return this way will certainly get back all of your withholdings.  But the extra payment could be a little tricky.  I suggest one of two options.  Option 1 is to go to the Estimated Payment section of the tax return and try to include the payment in that section of the program as an additional payment.  There probably is not an entry that perfectly describes your mistaken payment, but entering the payment on this screen will carry the amount over to the Indiana return to calculate as refund.  The problem is that the state may delay the refund, question it, maybe initially deny it, and then you have to spend extra time and effort to prove everything so that Indiana refunds you.

The other approach would be to not include the information regarding the extra payment but instead contact the Indiana DOR.  You are correct that you don't owe the money, but even if it is expeditious, it will still take a little bit of time to get Indiana to process it.

[z5levi]

Outstanding! Thanks for the help. I'll 100% give the IN DOR a call on Monday and see what they can do (most of me hope they'll just kind of laugh at my mistake just not take the cash).