Active Duty Military - New York State Tax Exempt

[macmisty]

I am active duty military, entering into the military as a NY resident, stationed currently in Virginia.  I have met the criteria to claim NY non-resident and submit the IT-203, IT-225 & IT-2.  My W2 has NY State allocated with NY income tax withheld.  For over ten years I have mailed paper filed and it took forever to get back my return.  I have paper filed because each time I attempt to submit NY state electronically through Turbo-tax I get a warning that states: Allocation Worksheet for PY?NR: Wages Salaries, Etc, Col D New York wages were reported on federal form W-2 but no wage income has been allocated to New York. This will cause the efiled return to be rejected by New York State."

When I go to the form, it opens IP the PY/NR Allocation Worksheet, if I don't place $0 in column D in wages the program only offers a partial return.

Background use with Turbotax:

I normally e-file federal joint with my spouse, then break up the states separately (Joint filing separately) and allocate all of the children and deductions with my spouse to keep NY non-resident simple and just focused on my military pay.

What am I doing wrong as I am hoping to start filing NY state via Turbo Tax for this year and the future to get all of my income tax withheld returned in a timely manner? 

[DaveF1006]

It depends. Since you entered New York State as your Home of Record state, this is your resident state. All of your military income will be allocated to the state of New York as the state of Virginia is a non-resident state to you for income tax purposes. Your wife however can choose her state of residence whether it be Virginia or NYS. All of her income will be reported as a Virginia resident if she hasn't formally declared NYS as her resident state. This privilege is awarded to her under the Military Spouse Residency Relief Act. 

If you wish to change your State of Legal Residence (SLR), you need to submit form DD Form 258 to your local finance officer to change from NY to Virginia. You may wish however to delay this choice unless Virginia is your permanent duty station.

let us know if this addresses your specific concern.

What is my Military State of Residence

[macmisty]

While I appreciate your reply, that is information I am aware of.  My question was specific to why I get the error and how the forms should be completed in Turbo Tax so that NY State will get an electronic tax package to issue a total refund.  For more than two decades I have been filing via a manual entry process and snail mail, because Turbo Tax does not populate the forms correctly.

[DaveF1006]

 According to NYS Military and Veteran Benefits, you may exclude your military pay under these conditions:

Resident service member stationed and living outside New York:

• Did not maintain a permanent residence in New York State during the tax year, and
• Maintained a permanent residence outside New York State during the entire tax year, and
• Spent 30 days or less in New York State during the tax year

Now how to exclude your NYS military pay from the return in Turbo Tax if you fit the conditions listed above

1. Select State tab.  Select NYS
2. The first screen will suggest you file as a resident.  Here select change residency and declare yourself a non-resident
3. Answer the questions until the reach a screen that says New York Income Allocation. If it asks if your income was earned in NYS, say no.
4. Now it will give you a summary of all your W2's. Here you will select edit next to your military pay or for all other W2's entered in your return.
5. Next you should see a screen that is labeled Allocate Wages to New York
6.  Here select Allocate by percentage Record a 0 in this box.
7.  Now you should have a NYS that refunds your entire state withholding for 2024 as your entire military pay is excluded

Caution. Do not try to enter this information on the form itself. Use the procedure exactly the way it is outlined and you should have a tax return that can be electronically filed.