Veterans Auto and Education Improvement Act of 2022 and Military Residency

[pg1917]

The Veterans Auto and Education Improvement Act of 2022 allows active duty servicemembers to elect to file taxes in the state in which they are stationed. I am currently an active duty servicemember and a New York domiciliary and have taxes withheld by New York. I am stationed in a state without an income tax and would like to use that state for income tax purposes. How do I tell New York that is what I want to do and get my withholdings returned? Thanks. 

[DMarkM1]

You are correct and in fact NY already has a provision for you and your spouse to be considered non-resident and therefore if you have no NY source income you would not have a filing requirement in NY.   Here is the NY reference.

However, since NY taxes were withheld and you wish to have those refunded you will need to file a nonresident return and allocate zero income to NY in the NY state interview.  Use the steps below.

NOTE:  You should change your residency state with your finance office to stop NY withholding going forward. Your spouse if applicable should do the same with their employer(s).  

1. In "My Info" "Edit" your information to verify/indicate active duty military status.
2. Select the state you are currently assigned in as the state your resident state on 31 Dec.
3. Answer "No" to Did you live in any other states?"
4. Continue
5. Scroll down to "Other State Income"
6. Answer "Yes" to Did you earn income in another state?"
7. Select "NY"
8. "Wages and Income"
9. "W2"
   Enter/Verify form entries and be sure to select "Military Active Duty Pay" in the follow on question for "Uncommon Situations"
10. Complete the federal interview
11. "Start/Continue" the NY state nonresident interview.
12. In the "Income" section you will be able to allocate zero to NY.
13. This should generate a NY refund for the taxes withheld.  

[pg1917]

Thanks. How do I tell New York that is why I am filing a non-resident return to get a refund?

[BillM223]

You don't need to tell NY, just file the nonresident return.

You just need to document this conversation in case New York State ever writes you a letter.