Maryland Qualified Civilian Spouse

[asparrow08]

I have a couple of military clients in MD who got married in 2019. Service member's permanent residence is in another state. Per the Military Spouse Residency Relief Act, the spouse is allowed to claim the service member's state of residence, regardless of the date of marriage. MD has a Qualified Civilian Spouse exemption form (MW507M) that they say is required to be submitted for a taxpayer to be able to file with their spouse in another state. It also says that wages are only exempt from the exemption was approved, meaning that they would have to file two different states in the year of marriage. All of this is against what the MSRRA states.

Has anyone had experience with this in MD or another state for that matter?

[RollTide68]

With the update to the Military Spouse Residency Relief Act the spouse can now claim the state of residence of the military member.  Based on what you provided in your post the MW507M is like a W-4 for Maryland state tax exemption for wages.  To be filed annually with the employer by Feb 15.

If the military member and spouse both do not pay Maryland state tax then they would not file a Maryland tax return.  However if state tax was withheld and they would like to a refund then I would file as a non-resident.

If the state the military member and spouse claim as their state of residence requires a return then they must file that return as well.

[rbynaker]

A quick Google search hit this site:

https://militarybenefits.info/military-spouse-act-residency-relief-msrra/

which says "The spouse does not inherit the domicile of the servicemember upon marriage"

Check your original assertions, I'm not sure they are correct.

[itonewbie]

Nothing on that form contravenes the Act.  The exemption will be recognized after the form is submitted and the eligibility is verified based on the supporting documents submitted.

Just because the spouse can elect to file as NR doesn't mean the employer has authority to retroactively refund taxes that have been withheld to date, which is a matter governed by state statutes and there's nothing in the Act (before or after the amendment) that compels states to do so.  The spouse would simply file an NR return to claim a refund.

[itonewbie]

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@rbynaker wrote:

A quick Google search hit this site:

https://militarybenefits.info/military-spouse-act-residency-relief-msrra/

which says "The spouse does not inherit the domicile of the servicemember upon marriage"

Check your original assertions, I'm not sure they are correct.

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The site is correct in making that statement.  50 U.S. Code § 4001(a)(2)(B) refers only to "residence", not domicile.  This would mean the spouse will still be on the hook for excise tax and whatever else that is tied to domicile, until and unless a new domicile is established in fact.

[RollTide68]

Update to MSRRA

https://www.military.com/money/military-spouses-residency-relief-act-mssra

[itonewbie]

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@RollTide68 wrote:

Update to MSRRA

https://www.military.com/money/military-spouses-residency-relief-act-mssra

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Yes but there are no major changes to the existing provisions.  Sec. 302 and 303 deal with the new election and spouse's right to vote based on the military spouse's residence.  Neither creates the kind of right the OP is looking for.

[itonewbie]

Here're the statutes for easy reference:

Current statute as amended: https://www.law.cornell.edu/uscode/text/50/4001

Veterans Benefits and Transition Acts of 2018 (which amended the MSRRA): See Sec. 302 (and 303) - https://www.congress.gov/bill/115th-congress/senate-bill/2248/text

[asparrow08]

Thank you for your insight.  Section 302 of the Veterans Benefits and Transitions Act of 2018 states:

"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.’

My argument is this allows my client to claim her income with her husband in Wisconsin, which means she would file a NR return for MD for 2019, getting all of her MD withholdings back.  

[itonewbie]

Yes, that is what should happen to MD SIT withheld prior to the exemption becoming effective when the NR return is filed.  Just that the employer can't refund the MD SIT withheld upfront.

[asparrow08]

Right - that was what I was planning on doing.  At the end of the day, the spouse is entitled to receive those MD withholdings back through the NR return and the exemption form doesn't have anything to do with whether she is eligible to get those withholdings back.  It only impacts whether the employer can stop the MD withholdings moving forward.