Wisconsin - US Armed Forces Active duty pay

[soojiki]

Hello, I'm currently active duty (E5) in the Navy and am filing as single and as myself. I have a question:

My state/HOR is Wisconsin and in the military portion I see three options: Reserves.../Combat zone/ and US Armed Forces Active Duty Pay. I understand that I am not a reservist, know that I did not get combat pay but am confused with the last part. Is that intended for Reservist called to active duty or is it all active duty member, serving in Wisconsin, that can put their entire box 1 amount from the W-2 provided from DFAS? I initially placed my entire Box 1 from my W-2 into that and saw the numbers jumped up. Was skeptical so I'm holding off from completing the returns for now. I googled this particular portion and found this: 

Does Wisconsin exempt any portion of military pay?

Military pay that is exempt for federal tax purposes is also exempt for Wisconsin. For example, military pay that qualifies for the federal combat pay exclusion is also exempt for Wisconsin tax purposes.

Note: A qualified hazardous duty area (the Sinai Peninsula of Egypt) is treated in the same manner as if it were a combat zone for purposes of the exclusion of certain combat pay of members of the armed forces.

In addition, if you were a member of the Reserves or National Guard and served on active duty, you may subtract any military pay that is included on your W-2 and meets all of the following:

• Received from the federal government
• Received after being called into active federal service or into special state service authorized by the federal Department of Defense
• Paid to you for a period of time during which you were on active duty
  
  

CAUTION: The subtraction only applies to members of the Reserves or National Guard who are called into active federal service under 10 USC 12302(a), 10 USC 12304, or 10 USC 12304b or into special state service under 32 USC 502(f). However, it does not apply to pay that members of the Reserves and National Guard receive for their weekend or two-week annual training. It also does not apply to a person who is serving on active duty or full-time duty in the active guard reserve (AGR) program.

An additional subtraction is allowed for the amount of basic, special, and incentive pay received from the federal government under 37 USC chapters 3 and 5 during the period that members of the U.S. Armed Forces are on active duty. A member of the U.S. Armed Forces includes all regular and reserve components subject to the following jurisdictions, including the Coast Guard and commissioned officers and personnel below the grade of commissioned officers in these forces:

• Secretary of Defense
• Secretary of the Army
• Secretary of the Navy
• Secretary of the Air Force

With that said, does it mean my entire Box 1 from my W-2 is supposed to entered into the US Armed Forces Active Duty pay? I was skeptical as I don't remember seeing this portion during my last tax return. What scared me was the CAUTION portion, but then the additional subtraction confused me. I know my box 1 consist of my basic pay and career sea pay(special pay), but learned while in the Navy always questions excessive amount of money being possibly received. Any help is greatly appreciated and I may have seemed dumb for asking this when it could be simple. Better to be safer than sorry. 

[DanaB27 · Accepted solution]

Yes, you will enter your entire box 1 amount from the W-2 provided from DFAS when you get to the "U.S. Armed Forces Active Duty Pay" screen.

[Dugall]

Still confused. The WI DOR site clearly indicates that active duty military income for "residents" of WI (not stationed necessarily in WI) is subject to state tax with a few exceptions (equivalent to federal exclusions like combat pay).  In TurboTax, on the page titled, "U.S. Armed Forces Active Duty Pay," when I input my military pay from DFAS in the block there, my refund jumps up a couple of thousand which is pretty much the entire amount of state tax I would need to pay, had it been included in taxable income. I have to think that either the WI DOR is wrong about military pay being taxable, or, TurboTax (TT) has it wrong. The TT imbedded help isn't at all helpful. Click on "Learn More" and you get:  "A member of the U. S. Armed Forces includes all regular and reserve components, the Coast Guard and commissioned officers and personnel below the grade of commissioned officers in the following:
1) Secretary of Defense
2) Secretary of the Army
3) Secretary of the Navy
4) Secretary of the Air Force"

My question would then be, what are "commissioned officers... below the grade of commissioned officers"? 

[ErnieS0]

Update: Wisconsin did update its treatment for active duty military pay beginning with the 2021 tax year Refer to the answer by awesome Tax Expert @DanaB27 in Wisconsin - US Armed Forces Active duty pay.

Dana cites:

"If you were a member of the U.S. Armed Forces, you may subtract the amount of basic, special, and incentive pay received from the federal government under 37 USC chapters 3 and 5 while on active duty. Members should refer to their Leave and Earning Statements (LES) and military orders to determine the pay eligible for the subtraction."

Please see WI Pub 128 page 9 for details.

@Dugall

Wisconsin does not allow a subtraction from normal military pay. 

The subtraction only applies to members of the Reserves or National Guard who are called into active federal service. The screen in TurboTax says Reserve or National Guard Member Adjustment.

Wisconsin does follow federal rules that exclude some income, such as combat pay. These federal excluded amounts are not included in Box 1 of your W-2 so there is no additional subtraction on the Wisconsin return.

If you are regular military, Wisconsin taxes the same pay as federal.

See Individual Income Tax Military

Thank you for your service.

Edited 02/28/22 | 09:53 PT

[Dugall]

The screen that I'm looking at says, "U.S. Armed Forces Active Duty Pay," and any suggestion that it might only apply to the Reserves or National Guard is unclear at best. It appears that this is the same screen ("U.S. Armed Forces Active Duty Pay) that the original poster is referring to and he is advised to enter his entire regular duty Navy pay. That results in a large increase in the Wisconsin tax refund which I believe is not the intent of Wisconsin tax code. Could you have another look? ErnieSO's response to my first entry refers to a page title that differs from the one I am making reference to and I believe the advice to original poster may be incorrect or the page misleadingly labeled or explained. 

Thanks,

Dougal  

[DanaB27]

The regular active-duty military is allowed to subtract active-duty pay in WI, this is new for 2021. It will be entered on line 19 of Schedule SB.

"If you were a member of the U.S. Armed Forces, you may subtract the amount of basic, special, and incentive pay received from the federal government under 37 USC chapters 3 and 5 while on active duty. Members should refer to their Leave and Earning Statements (LES) and military orders to determine the pay eligible for the subtraction."

Please see WI Pub 128 page 9 for details.

Box 1 on a W-2 from DFAS includes all taxable active-duty pay.

In regards to your previous question "what are "commissioned officers... below the grade of commissioned officers". This simply means Enlisted military personnel, for example, E-5 Sgt. in the Army.

@Dugall

[kineylikes]

Hi, Dana.. I have been unable to find how to submit the WI Form 1 / Schedule SB with my amendment. Can you assist? Thanks.

[DanaB27]

When you are working on your amended return please verify that indicated in two places that you are military:

• The first is in the "My Info" section after you enter your name and occupation. You can click on "My Info" on the left and click on "Edit" next to your name. Scroll down to "I am a member or former member of the U.S. Armed Forces (active, reserve or National Guard)." Turbo Tax will ask follow-up questions.
• The second is on the "Do any of these uncommon situations apply to this W-2?" screen after you enter your W-2, you can check the active-duty military box for the W-2. (Click on "Search" on the top right, type “W-2”, and click on “Jump to W-2”)

When you are in the State interview continue through the questions until you get the "U.S. Armed Forces Active Duty Pay" screen and enter your active duty pay from box 1 of your DFAS W-2.

Please see "I need to amend my state return" for additional information

@kineylikes