Taxpayer and Spouse Both Military Members with different states of residence

[gabcpa916]

This is a technical system support question...I'm a retired AF Colonel so I understand the idiosyncracies of the tax code as it relates to military service.  I'm doing taxes for my niece who is in the Air Force as well as her husband.  She is a TX resident and he is a NC resident (I'll talk to him about that for tax purposes).  They are opting to file MFJ on their Federal Income Tax return.  I've been careful to identify TX (US) vs NC income separately when I input the data.  In the NC tax return that is produced, my niece appears as a resident of NC which she is NOT.  In the profile screen, I don't see anything that allows me to denominate my niece as a TX resident and her husband as a NC resident separately.  Is there anyway around that or do I have to do some "fake" returns to separate out the state activity separately?

[qbteachmt]

"I'm doing taxes for my niece who is in the Air Force as well as her husband."

Are you using ProConnect to prepare their taxes?

If not...

You seem to be lost on the internet.

You’ve come to a Peer User community for Intuit Tax Preparation products supporting tax preparation professionals using ProSeries, Proconnect and Lacerte , and you may be looking for support as an individual taxpayer. Please visit the TurboTax Help site for support.

Thanks.

[gabcpa916]

Yes...ProConnect...I do my family's taxes for free...everyone else pays.  Just because I'm a retired Colonel doesn't mean I'm not a CPA.  Not lost on the internet.

[qbteachmt]

"Just because I'm a retired Colonel doesn't mean I'm not a CPA."

No one even whispered that, sir. Don't assume things about others, and we won't assume things about you. (my father and my stepfather were AF, as are other members of the family, including a B-52 pilot who led Jr ROTC and basketball in retirement; we are a multitude of our skills...)

Personal-perspective tax issues often are asked by someone using TurboTax, but lost on the internet, because Intuit accounts get you into every Intuit community. A lot of people don't understand this community is a user group for specific software that is other than TT. If you have spent much time here, you've seen it for yourself.

One of the issues comes from how some States want all income reported, and then allocated. Some want only allocated income reported. Some want it all reported and they tax it, then they give back credit for taxes paid on that same income to another State (if any).

"In the NC tax return that is produced, my niece appears as a resident of NC which she is NOT."

She should be qualified for military exemption, though. Of course, military exemptions vary, too, across the States. I'm not up on NC, but it seems you might want a Non-Resident allocation, then?

You can see if any of this helps:

https://proconnect.intuit.com/support/en-us/help-article/state-taxes/enter-part-year-nonresident-sta...

https://proconnect.intuit.com/community/proseries-tax-discussions/discussion/military-state-of-legal...

https://ttlc.intuit.com/turbotax-support/en-us/help-article/state-taxes/military-filing-information-...

https://www.ncdor.gov/taxes-forms/individual-income-tax/armed-forces-information/frequently-asked-qu...

https://www.ncdor.gov/taxes-forms/individual-income-tax/armed-forces-information/important-tax-infor...

https://www.ncdor.gov/taxes-forms/individual-income-tax/armed-forces-information/active-military

I see it's been a month since you first asked and no one else has stopped in to help, so this might be unique around these parts. Hope that helps.

[BobKamman]

G.S. 105-153.8(e) requires a married couple to file a joint State income tax return if:

1.  They file a joint federal income tax return, and  YES
2.  Both spouses are residents of North Carolina or both spouses had North Carolina taxable income. NO

So why are you filing a joint return for them? 

[itonewbie]

From an input standpoint, there's no option within ProConnect Tax/Lacerte to use the MFS exception on the NC return when federal is filing MFJ.  (For some states, there are options and you'd find them mostly under Misc. Info./Direct Deposit, on the tab for the respective state.)

What you need to do is to prepare the MFJ federal return as usual and code everything correctly for T/S/J, State, and N/S.  Check that you are happy with the federal return in terms of completeness and accuracy. 

I assume you have already considered their matrimonial domicile based on their facts and circumstances (since they're not settling in TX at least for the time being) and how community property rules may apply, if at all.

Review the MFJ/MFS comparison to get an idea how the return would be split.  Then, follow the instructions in this article to split an MFS return for the NC husband:

https://proconnect.intuit.com/support/en-us/help-article/tax-filing-status/generate-married-filing-j...

Hope this helps.

[qbteachmt]

I read the topic details that the nonmilitary spouse claims residency of TX, but the military person is a resident of NC, where they are located and where the spouse worked.

I provided a link to the topic on this community that tells us:

"The Military Spouses Residence Relief Act requires the spouse of an active duty Military member to become a resident of the same state as the Military member and it does not matter when they were married during the year."

Which make them both NC residents.

I provided the link to the TT article which explains:

"Active duty military file their tax returns in their state of legal residence (SLR)—usually their home of record state. Each state decides whether a service member must file a return when they are stationed outside their resident state.

A nonmilitary spouse of a service member who qualifies under Military Spouse Residency Relief Act (MSRRA) can choose to keep that same legal residence as the military spouse. If a spouse does not qualify and/or does not choose MSRRA, they are considered a resident of the current state they are living in depending on the resident rules of that state."

Which might apply to this spouse, because as I noted, every State can handle military exemptions differently. However, I also provided the link to NCDOR, which includes:

"The Servicemembers Civil Relief Act provides that a spouse shall neither lose nor acquire domicile or residence in a state when the spouse is present in the state solely to be with the servicemember in compliance with the servicemember’s military orders if the residence or domicile is the same for both the servicemember and the spouse."

I don't see anything that tells you, one day he also will claim to be from TX, so let's take advantage of this now. It seems she is now "from NC."