Big Mess - Military Spouse in GA, Domiciled in FL, Working remote for CA company

[BulldogTom]

New client this year.   Lives in GA with Active Duty Military Spouse who is stationed there.   Domicile is FL.   Worked for a company in GA for part of the year.   Worked remotely for 2 companies in CA.   Both companies show her wages as CA source income, though she never set foot in the state.   Both have state income tax withholdings.

I think the companies need to correct her W2s?  

I think all wages are exempt from CA and GA taxes under the military spouse relief act?   

If the W2s are not corrected, and even if they are, I think we need to file a CA 540NR to get the withholding back.

I don't do a lot of Military returns, so any help/suggestions would be appreciated.

Thanks in Advance.

Tom
Longview, TX

[Lee B]

Difficult situation, especially since Florida doesn't have a state income tax.

The two CA employers are very unlikely to redo their W 2s and all of their Payroll Reports.

How do you get the CA WH back without corrected W 2s?

Really glad I don't have this return.

[Medlin Software, Dennis]

Same old same old. Getting employers to change could result in dismissal.

If one wants to go that way, offer the employer one chance to rectify, then move on. I used to think ignorance was the usual reason, but it has drifted to known non compliance.

Nexus issues will get worse over time as states increase efforts to use obscure rules to increase income (recover lost income?).

[Possi]

The employer won’t correct the W-2. They withheld properly as far as they knew. A new tax form needs to be filed with the employer, stating that the employee is exempt from California state taxes.
In Virginia, that form is a VA4. 
There should be a line on the California tax return where you can back out the wages. See if there is one on the California Nonresident return. If it isn’t there, put in a call to California. It will be worth the call. They might have a practitioner priority line, which I’m sure you would know about, @BulldogTom  

In Alabama, it gets backed out on the line for other income.

in Virginia, we file a special form 763S.

Each state is different it seems.

Include a copy of the service members LES. That is the form that determines the state residency. 
 

I hope this helps!

[Medlin Software, Dennis]

The employer knew. Unless the person was commuting somehow, they knew the person was not working in CA. 

[Lee B]

More than likely someone in the payroll dept didn't want to deal with the hassle of dealing with these other state reporting requirements.

[Possi]

5 hours ago, Medlin Software, Dennis said:

The employer knew. Unless the person was commuting somehow, they knew the person was not working in CA. 

Many times, a payroll company takes care of payroll, and it’s not the actual business at all. It shouldn’t be real hard to get the withholding back. Then, have the employee fill out a new W-4 for the state and mark it exempt. 

[BulldogTom]

OK, more information comes out from the client.   

@Possi LES shows FL.   No issue there.

The spouse DID travel to CA for some of the work.  It is hybrid work, not remote.  Client does not know how to break it out between in state and out of state, so we decided all of it is CA source income, and the spouse wants to continue working for the company and will travel back and forth to do the work.  The CA income is taxable to CA because the military member is not stationed in CA - only spouses of members who are stationed in CA can exclude under MSRA.   That is how I am reading the CA instructions.   So a 540NR needs to be filed.   

For GA, I think I file a non-resident return and all income is excluded under the MSRA.   That is how I am reading the instructions.   Am I correct?   

Thanks for chiming in.

Tom
Longview, TX