FAQs - Military Spouses Residency Relief Act
The Military Spouses Residency Relief Act amends the Servicemember Civil Relief Act to include the same privileges to a military servicemember’s spouse. This Act amends among other tax administrative items, the elimination of the servicemember spouse’s burden of filing multiple part-year and nonresident income tax returns when they earn wages in California under the following conditions:
- The servicemember is in California on military orders; and
- Is legally married to the spouse; and
- The spouse is in California solely to live with the servicemember.
The Act grants several new privileges to the spouses of military servicemembers, including but not limited to changes to the spouse’s tax domicile for individual income tax purposes. The new law allows a military servicemember’s spouse to keep a tax domicile throughout the marriage, even if the spouse moves into California, so long as the spouse moves into California to be with a servicemember who is in the state because of military orders.
- Does the military spouse employee need to file a new Employee’s Withholding Allowance Certificate (DE 4) for the income tax exemption?
Yes, the DE 4 has been modified to include this new exemption and is now available online for employers and military spouse employees.
- Does the employer or military spouse employee need to provide proof to declare another tax domicile state other than California?
The modified Employee’s Withholding Allowance Certificate (DE 4) provides a specific line and signature for the military spouse to attest under penalty of perjury, that they are requesting an income tax exemption from the State of California. This statement will satisfy the proof requirement. However, the following records (not inclusive) may be requested from the employer or employee to verify the tax exemption if an audit is performed:
- Spouse’s military ID card.
- Servicemember’s Leave and Earnings Statement (LES).
- Servicemember’s W-2.
- Spouse’s driver’s license.
- Spouse’s voting registration.
- Department of Defense Form DD 2058, Declaration of servicemember’s “permanent state of residency”.
- Marriage license.
- Divorce decree.
The servicemember spouse’s wages are still subject to California Unemployment Insurance and Disability Insurance taxes as the spouse performed services in California. However, if the spouse elects to exempt wages that are subject to California Personal Income Tax (PIT) by filing the new Employee’s Withholding Allowance Certificate (DE 4) form, no PIT wages or withholding need to be reported by the employer.
- Is there anything special an employer needs to do in filing the Quarterly Contribution Return and Report of Wages (DE 9) and the Quarterly Contribution Return and Report of Wages (Continuation) (DE 9C) for a military spouse excluding wages? Should the employer file a separate DE 9C for these wage earners since they are not subject to PIT withholding?
The employer would still report the military spouse’s total subject wages on the DE 9C along with any other employee’s wages. The PIT wages and withholding reported for the military spouse would be zero, if a DE 4 claiming the exemption has been filed. The DE 9 would not be affected by the military spouse wages as PIT wages are not reflective on the form. The employer would still report the military spouse’s total subject wages and UI and DI taxable wages, as they still remain subject to those respective taxes.
NOTE: In regards to the 2009 withholding, employers should report on their DE 6 and DE 7 for 2009, exactly what was earned and/or withheld according to the DE 4 in effect at the time. Employees who would be eligible to claim this exemption but hadn’t due to the timing of this change should seek a refund through their 2009 tax return. The Franchise Tax Board stated in a recent press release that the FTB Form 540NR California Nonresident or Part-Year Resident Income Tax Return will be available in January 2010 to assist them.
Yes, the effective date for the income tax exemption is for the tax year beginning on or after January 1, 2009.
- Do I have to refund a military spouse employee the California PIT withholdings I already submitted to EDD?
An employer is obligated to make withholding based upon the W-4 or DE 4. If an employee changes his or her withholding form and elects the exemption then the employer must comply with that election going forward. Therefore, an employer would not be required to refund any monies properly withheld under the previous W-4 or DE 4. The employee would have to claim the refund on their state tax return. Questions regarding your specific personal income tax return filings and PIT withholding refund requests should be directed to the Franchise Tax Board (FTB) at (800) 852-5711.
Pages 12 and 13 of the California Employer’s Guide (DE 44), state the employer must submit the Employee’s Withholding Allowance Certificate (DE 4) to FTB for a determination if either of the following situations occur:
- The employee claims more than 10 withholdings.
- The employee claims exemption from State or federal income tax withholding and the employee’s usual weekly wages will exceed $200.
Yes, however, if the employee is a military spouse, it may not be necessary to ask FTB to make a determination. Additional information regarding this issue may be obtained by accessing FTB’s Website at www.ftb.ca.gov.