Military Spouse - Remote Work

[LN16]

Hello,

I’m a military spouse of an active duty service member who is stationed in DC. We live in VA and our resident state is Wyoming. I work remotely for a company in California. I filed a California form 540NR, which indicates our state residence as WY and that my spouse is in the military. According to the CA FTB website, the military spouse can only take advantage of the MSRRA if stationed in CA. I’m hoping for clarification on this detail as a remote worker, and if I filed the CA return correctly. 

https://www.ftb.ca.gov/forms/2022/2022-590-instructions.html#E-Military-Spouse-Residency-Relief-Act-...

It states, “A military servicemember’s nonmilitary spouse is considered a nonresident for tax purposes if the servicemember and spouse have the same domicile outside of California and the spouse is in California solely to be with the servicemember who is serving in compliance with Permanent Change of Station orders.”

[DMarkM1 · Accepted solution]

If you did not physically work in CA and no CA taxes were withheld you do not need to file in CA.  The military residency rules do not apply to you in CA in this situation.  You are not living/stationed in CA on military orders and CA is not your home of record. 

If you had days of physically working in CA you would file a nonresident CA return as married filing separate with only your income/deductions and allocate to CA only the income earned on the working days in CA.  

Additionally, if there were taxes withheld for CA then you would file a separate CA return and allocate zero (0) income to CA so that all taxes withheld would be refunded.  If the latter is the situation, you need to have your employer stop withholding CA taxes going forward so that you do not need to file there. 

If you need to file in CA, in TurboTax online products, you would need to sign up for a separate account and create a "Mock" federal separate return which will then flow into a CA separate return.  In the "My Info" section you will indicate you lived in WY all year.  Indicate you are filing separately and then, still in "My Info", scroll down to "Other State Income" and answer "Yes" you earned income in another state and select "CA".  This will generate a non-resident CA return only since WY does not have a state income tax.  

Next, you enter only your income and deductions in the federal interview sections; the entries will flow to the CA interview. You will not file the separate "Mock" federal return since you are filing jointly at the federal level.  You will need to print/mail the CA return since you are not e-filing the corresponding federal return.