I was active duty and my spouse was charged for state taxes from two different states, how can I fix this?

[kingadam44]

I was active duty military for most of 2016 and stationed in NC until I got out in December. My wife and I are both from IN which is where we just moved back to. She has worked all year in NC and then in Indiana in just the month of December. After going over her W2 and paystubs I realized she was taxed for both NC and Indiana. I know that she should only be paying Indiana taxes under the Military Spouse Residency Relief Act (MSRRA), so how can I get her W2 fixed or file our taxes correctly?

[DS30 · Accepted solution]

Unfortunately if her employer withheld state income tax in the wrong state, she will need to file a nonresident state income tax return in that state in order to get a refund of these erroneous state tax withholdings.

If she is covered under MSRRA, she will only file taxes in your state of legal residency (SLR).

In order to get the full refund of her NC state income tax withholdings, she will need to file a nonresident NC return but report zero "0" income from NC (even though she does have NC wage income). She must mail in this NC nonresident state income tax return and include her state W-2 information. She will want to include an explanatory statement with her NC return stating her situation (that her NC employer withheld NC state income taxes from her wages in error because she is a military spouse and covered under MSRRA).

You can add a state under the state taxes tab in TurboTax.