Military spouse. Does she have to file a Virginia tax return?

[MilesPA]

I have a new client with the following set of facts:

1)  Husband is in military and his state of residency is Florida.  Thus he files no state tax return.

2)  Husband is on active duty in Virginia.

3)  Wife is a Virginia resident with earned income in Virginia.

4)  Their prior CPA did not file a Virginia return for spouse's income claiming the Veterans Benefits and Transition Act of 2018 allows her to claim her spouse's state of residence, i.e., Florida.

I'm not sure that I agree with this based on the following:

The Military Spouses Residency Relief Act allows military spouses to declare the same state of legal residency as their spouse. The Veterans Benefits and Transition Act allows spouses to make that choice regardless of when they were married. The following conditions must be met to qualify under the MSRRA:

• The service member is living on military orders in a state that is not his/her resident state.  This is true.  He's ordered to be in Virginia.
• The spouse is in that state solely to live with the service member.  This is not true.  She is a resident of Virginia.
• Both the service member and spouse have the same resident state.  I don't even understand this one.  If they have the same resident state why would she need to make a choice?

The spouse only pays taxes on income in their state of legal residency when they meet the above conditions.  Finally, even if the conditions are met, she pays taxes to her resident state.  Which is Virginia!

Sooo………………  Am I right?  Does she need to file a Virginia return?

Thanks.

Miles and his spinning head……………………………..

[sjrcpa]

On what are you basing your statement that she is a VA resident?

[MilesPA]

She lived there her whole life.  She and her husband bought a home there over 2 years ago and her husband was serving active duty there during that time.  He was Florida resident his whole life.  Her CPA in Virginia says she can pick her husband's resident state of Florida.  I believe that the spirit of the law was to relieve the spouse of the obligation to file in every state her husband was moved to.  He actually was serving in her state of residence. 

[sjrcpa]

I agree with you that she is a VA resident.

[rbynaker]

I'm on the fence.  The 2018 act took me from rules I understood and could make sense of (and could explain) to these fuzzy "adopt the service member's residency" rules.  I don't have any current military clients so I haven't had to research it further but it sure sounded like you could just make an "election" if you were the spouse.  I recall when reading the law a couple years ago that it created too much flexibility, even to the point of rewriting history.  It wouldn't be the first law that Congress passed that didn't make sense and had unintended consequences.  I'd have to go back and reread it but I think she might be able to elect FL residency even if she never lived there.  (Sorry, I'm not much help, mostly just rambling at this point!)

Where did she last vote?  If he's a FL resident, he should be voting (absentee) in FL.  If she elects to be a FL resident then wouldn't she be voting in FL?

Rick

[rbynaker]

This probably isn't detailed enough to help but in case you haven't read it:

https://www.tax.virginia.gov/sites/default/files/inline-files/tb-19-2-military-spouse-veterans-benef...

The law was quite vague.  I think this is what we're talking about, Sec 302:

https://www.congress.gov/115/plaws/publ407/PLAW-115publ407.pdf

It's so short that I'll copy/paste:

SEC. 302. RESIDENCE OF SPOUSES OF SERVICEMEMBERS FOR TAX
PURPOSES.
(a) RESIDENCE FOR TAX PURPOSES.—Section 511(a)(2) of the
Servicemembers Civil Relief Act (50 U.S.C. 4001(a)(2)) is amended—
(1) by striking ‘‘A spouse’’ and inserting the following:
‘‘(A) IN GENERAL.—A spouse’’; and
(2) by adding at the end the following new subparagraph:
‘‘(B) ELECTION.—For any taxable year of the marriage,
the spouse of a servicemember may elect to use the same
residence for purposes of taxation as the servicemember
regardless of the date on which the marriage of the spouse
and the servicemember occurred.’’.

To me that reads that she can just "elect" to live in FL and not be subject to VA tax on wages.

Rick

[MilesPA]

Much appreciated Rick.  Reading Virginia's take on it, I think we're safe to not file there.  Anyway, thanks again. 

Miles