Military Employee stationed in NY

[HV Ken]

Military employee has been in NY at West Point for all of 2010. The W-2 he received from DFAS showed his state as TX, which is home base. He came to NY during 2009 for a 2 year stint. He said he was told that you pay state tax to your home base, in this case TX - with no state tax, and not the state you are temporarily stationed in. His wife is a civilian and had NY state W-2 income. I don't think I file them on an IT-203 (part-year/non-resident). Does he qualify for the S-18 subtraction (Include military pay you included in your federal adjusted gross income that you received for active service as a member in the armed services of the United States in an area designated as a combat zone.) on line 31? Is being stationed at West Point considered a combat zone?

This is a new one for me. Not sure how to file this, or if the assertion that your pay based on your home base and not where you are stationed for state tax purposes, is correct.

Would appreciate any help and guidance on this one! Thanks.

[GraceNY]

NYS Publication 361 is a great resource for your questions and is available at www.nystax.gov

According to that Publication, your Military employee is not consider a NY resident and not subject to tax on their income for military service unless they have changed their domicile with intent to establish a NY residence.However, income from non-military NY sources is subject to NY income tax and must be reported oon a non-resident return.

If spouse was also a TX resident, then she would file MFS, as Non-Resident of NY, on IT-203 to report her NY wages on W-2. If she is a NY resident, then she reports her W-2 income MFS, NY resident of NY on It-201.

West Point would not be considered a combat zone. Combat zones are the usual suspects like Irag, Afghanistan, etc. However, service members directly supporting operations in Iraq from other locations, who are receiving imminent danger pay or hostile fire pay, are deemed to be serving in a combat zone.

Hope this helps.

Grace

[kcjenkins]

I suggest you download and read Pub 3, for all the answers to all those and more.

http://www.irs.gov/pub/irs-pdf/p3.pdf

[HV Ken]

Thank you Grace and KC for the pointers in the right direction!

[HV Ken]

NYS Publication 361 is a great resource for your questions and is available at www.nystax.gov

If spouse was also a TX resident, then she would file MFS, as Non-Resident of NY, on IT-203 to report her NY wages on W-2.

Thanks Grace - it was a great help. And I still have questions!

Pub 361, page 10 has this example:

Example: A servicemember from Georgia is ordered to active duty in New York State. The servicemember’s spouse accompanies him/her from their home in Georgia to New York solely to be with the servicemember. The spouse obtains employment at a neighborhood store. The spouse is not considered a New York State resident and the income the spouse

receives is not subject to New York State tax.

I read this example to say that the spouse's NY wages is not subject to NY tax.

Q1: If this is true, do we not even file a NY return at all? She had merely $7 of NY withholding on her W-2.

Q2: And if we do not file a NY return, won't NY be looking for a return and send them a letter since her employer reported NY withholding?

I also see on the NY IT-203 the M2 2-character special condition code, which also seems to apply to the spouse's circumstances, if I am interpreting TSB-M-10(1)I, Military Spouses Residency Relief Act correctly. But this M2 code doesn't seem to have any effect on the IT-203 return and it is calculating a small NY balance due.

Thanks for another round of guidance!

[GraceNY]

I stand corrected on my earlier response. You are right. Under the MSRRA, the spouse's wages are not subject to NY tax. (I apologize. I relied on memory and an older version of my CCH Guidebook to NYS taxes).

Fill out IT-203. Include the military spouses' "exempt" income in the Federal Amount column, but do NOT include this "exempt" income in the NYS Amount column. If there is "0" in the NYS column, then there won't be any tax calculated. It should show a $7 refund. Enter the Special Condition Code "M2" in the box at item F on the front of IT-203. This will allow the NYS Tax Dept to properly process the return. This will also avoid any matching problems if NYS looks for a return due to NYS W-2 income.

If this spouse currently meets the conditions and is still working in NYS, she should fill out the IT-2104-E, Certificate of Exemption from Withholding, and give it to her employer.

Grace