bem wrote:

- quote -

Yes the law changed to conform to the Servicemembers Civil
Relief Act. It is all explained in FTB PUB 1032:
http://www.ftb.ca.gov/forms/04_forms/04_1032pub.pdf

--
Alan
http://taxtopics.net

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bem wrote:

- quote -

Yes, your client is right, there is a change that affects
2004 returns. It is the result of the 2003 re-enactment of
the Soldiers and Sailors Civil Relief Act of 1940 (now
called the Servicemembers Civil Relief Act of 2003, HR 100),
which precludes the states from including the military
compensation of nonresident members in any way in the
calculating of state tax liability.

Under the old rules, if a married couple with one
nonresident military and one resident civilian spouse filed
a joint California return, the military compensation of the
nonresident member was included in the total taxable income
calculation. The result would ordinarily be to increase the
average rate at which the California income was taxed.

Under the new federal law, the nonresident member's military
compensation cannot be taken into account. The result
ordinarily is to reduce the average rate at which the
California income is taxed.

California conformed to the federal change in 2004,
effective for all open years. If military compensation was
used in calculating total tax for any open year, a claim for
refund may be filed. The FTB requests that the amended
return be marked "HR 100" in red at the top, and that a
daytime phone number be provided.

In preparing 2004 returns, military compensation of a
nonresident member spouse should not be included in the
540NR total income calculation, whether MFS or MFJ.

I confess I haven't looked (don't do any compliance work
myself), but I'd have thought this would be covered in the
2004 Form 540NR instructions.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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Has California changed how to file if one spouse is
military, domiciled in another state but the other spouse
works in California?

I am only aware of two options in this situation. Married
filing separately for California even if they filed joint
for federal. Or Married filing joint using a California
part year return.

My client is saying that there is a new law where California
can not use the non resident military wages to increase
taxes though. Am I missing something?

Beth M.

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