Yardley CPA Posted March 9, 2018 Report Share Posted March 9, 2018 Just over a week ago, I posted information pertaining to an individual who was in the military and stationed in California. Here is that information: New client. Married husband and wife who live in Philadelphia, PA. Husband, who is in the military, was stationed in California for the entire year of 2017. Husband's W2 reflects normal federal wages and withholdings but does not reflect any state wages or withholdings, no California wages, and no Pennsylvania wages. It does have an FL for Florida, but no wages listed. Obviously, Florida has no income tax. With that said, this is my first military return and I want to make sure I'm not missing anything. I assume his state wages should flow to his Pennsylvania income tax return along with his wife's wages?? Since he is military, he is not eligible for any special exclusions, is he? Thank you. New question pertains to the wife who lived in New Jersey (while the husband was stationed in California for the entire year). She lived at her mothers house from January 1 to November 30, while working in Philadelphia. The couple purchased a new home in Philadelphia and moved into that home December 1. Her W2 only reflects Pennsylvania wages and Pennsylvania withholdings for the entire year no New Jersey wages. The two states do have a reciprocity agreement. Based on that reciprocity agreement, the question is how to prepare the returns. I believe I should prepare a Married New Jersey Part Year Resident Return for the period 1/1 through 11/30. It would show the 11 months of New Jersey taxable wages but no withholdings. I would then prepare a MFJ Pennsylvania Part Year Resident Return for the period 12/1 through 12/31. It would only reflect one month of Pennsylvania taxable wages with a significant amount of Pennsylvania withholdings. New Jersey would obviously have a balance due and Pennsylvania's return would result in a significant refund. I would use the MFJ vs MFS calculation on ATX to determine the most advantageous approach from a Federal perspective. Hoping to get thoughts on this approach. Thanks! Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 9, 2018 Report Share Posted March 9, 2018 The first question I have is whether you've established where the husband's state of domicile was for the first 11 months of 2017. Did I miss that piece of information, or is that still up for debate? If it is not NJ, then this client may be better off filing separate NJ returns because he wouldn't have any NJ-sourced income. NJ generally requires the return to use the same filing status as the federal, but it will allow separate returns in the case where one is a resident and the other full year nonresident. With the way NJ includes all income for the entire year on a joint return to calculate the tax and then prorate for the portion of income from NJ, it is a way that the state taxes gets more of the income into the higher brackets. 1 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 9, 2018 Report Share Posted March 9, 2018 Oh, and as far as PA, I'm sure as a PA preparer that you know PA doesn't require joint filing but allows it as a matter of convenience to the married filers. Did husband actually establish PA residency on 12/1, because you said he was stationed in CA all year. I think it is possible for him to settle on the purchase of the home but not yet establish PA residency. It may be that the husband has no filing requirement in PA for 2017, and the wife should file MFS in PA as a PY for the one month of Dec. 1 Quote Link to comment Share on other sites More sharing options...
mircpa Posted March 10, 2018 Report Share Posted March 10, 2018 What about husband's CA source W-2 ? since you say he was stationed in CA for whole year don't you think he should file CA 540 & NR adjustments. I am just wondering if he was stationed in CA for whole year why would W-2 says FL. Quote Link to comment Share on other sites More sharing options...
jklcpa Posted March 10, 2018 Report Share Posted March 10, 2018 1 hour ago, mircpa said: What about husband's CA source W-2 ? since you say he was stationed in CA for whole year don't you think he should file CA 540 & NR adjustments. I am just wondering if he was stationed in CA for whole year why would W-2 says FL. This whole discussion that took place earlier should bring you up to speed - 2 Quote Link to comment Share on other sites More sharing options...
Hahn1040 Posted March 10, 2018 Report Share Posted March 10, 2018 the husband is active duty military. He is a FL resident. He remains a FL resident unless/until he changes his state residency or he separates from the military. The spouse could possibly come under the Military Spouse Residency Relief Act of 2009(MSRRA ). If she were also a resident of FL and she lived with him under military orders. However, we don't know if she is (was) a FL resident, but from the post, I think that we do know that she was not living in the same place as the active duty husband, so the MSRRA does not apply to her and she is just like any other civilian: She is a resident of the state where she lives and works. My understanding is that she worked in PA all year, so PA would tax her earnings whether she lived there or not. It is PA source income. Those of you who know PA and NJ well will know the process for those that live in NJ but work in PA. 1 Quote Link to comment Share on other sites More sharing options...
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