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Tax Information Regarding Spouses
of United States Military Servicemembers

On November 11, 2009, the President signed into law the Military Spouses Residency Relief Act (hereinafter, the “Act”) (S.475). The Act is effective for taxable year 2009 and thereafter. It does not affect taxes imposed or paid for 2008 and earlier.

The Act amends the Servicemember Civil Relief Act (hereinafter, “SCRA”) to provide 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 domicile is the same for both the servicemember and spouse.

Income Tax

Under the Act, a nonresident spouse of a nonresident servicemember may be exempt from Oklahoma income tax on income from services performed in Oklahoma if all of the following facts are true:

  • the servicemember is present in Oklahoma in compliance with military orders;
  • the spouse is in Oklahoma to be with the servicemember; and
  • the spouse maintains the same domicile as the servicemember.

Any refunds for taxable year 2009 may be claimed on or after January 1, 2010 by filing a Form 511NR ‘Oklahoma Nonresident/Part-Year Income Tax Return’.

Withholding Tax

A spouse whose wages are exempt from Oklahoma income tax under the SCRA may claim an exemption from Oklahoma withholding tax. Spouses wishing to claim this exemption from income tax may file a Form OW-9-MSE: Annual Withholding Tax Exemption Certification For Military Spouse with their employer. Spouses claiming exemption from Oklahoma income tax should consider the impact on their income tax (and estimated income tax) liability in their domicile state.

Frequently Asked Questions
Note: In these questions, a legal residents is used to mean domicile.

  1. Must the servicemember and the spouse have the same State of legal residence to qualify for the protection afforded under the Act?
  2. What is considered Oklahoma Source Income and is therefore subject to tax in Oklahoma for a nonresident servicemember and for the nonresident spouse who qualifies for the protection provided for under the Act?
  3. I am stationed in Oklahoma and my wife and I are both legal residents of State X (not Oklahoma). My wife worked in Oklahoma and qualifies for the protection afforded to nonresident military spouses under the Act. We have no other income earned in Oklahoma or from Oklahoma sources. How do we file for a refund of the Oklahoma income tax which was withheld from my spouse’s wages?
  4. I am stationed in Oklahoma and my wife and I are both legal residents of State X (not Oklahoma). My wife worked in Oklahoma and qualifies for the protection afforded to nonresident military spouses under the Act. We have at least $1,000 of gross income from Oklahoma sources (such as rental or royalty income; see question #2 above for more examples of Oklahoma source income). How do we complete our Oklahoma income tax return?
  5. I am an Oklahoma resident civilian married to a nonresident servicemember. Can I change my State of legal residence to my nonresident servicemember’s state and thereby qualify for the protection provided for under the Act?
  6. I am a servicemember whose State of legal residence is State A. Before, being stationed in Oklahoma, I was stationed in State B. While stationed in State B, I met and married my spouse. Can my spouse choose/adopt State A as her State of legal residence and thereby, qualify for the protection provided for under the Act?
  7. I am a servicemember whose State of legal residence is State A. While stationed in Oklahoma I met and married my spouse. Is my spouse able to choose/adopt State A as her State of legal residence and thereby, qualify for the exclusion provided for under the Act?
  8. If the servicemember has a permanent change of duty station (PCS) and the nonresident spouse remains in Oklahoma, does the spouse lose the protection provided for under the Act?
  9. If the servicemember has a temporary duty assignment (TDY), such as a deployment to a war zone, and the nonresident spouse remains in Oklahoma, does the spouse lose the protection provided for under the Act?

Question 1:
Must the servicemember and the spouse have the same State of legal residence to qualify for the protection afforded under the Act?

Answer:
Yes, the spouse must maintain the same domicile as the nonresident servicemember.


Question 2:
What is considered Oklahoma Source Income and is therefore subject to tax in Oklahoma for a nonresident servicemember and for the nonresident spouse who qualifies for the protection provided for under the Act?

Answer:
Oklahoma source income and therefore subject to tax in Oklahoma for a nonresident servicemember and for the nonresident spouse who qualifies for the protection provided for under the Act consists of:

  • Non-military salaries, wages and commissions for work performed in Oklahoma by the servicemember.
  • Income from an unincorporated business activity conducted in Oklahoma by either the servicemember or spouse.*
  • Distributive share of the Oklahoma part of partnership income, gains, losses or deductions by either the servicemember or spouse.*
  • Distributive share from Subchapter S Corporations doing business in Oklahoma by either the servicemember or spouse.*
  • Net rents and royalties from real and tangible personal property located in Oklahoma by either the servicemember or spouse.
  • Gains from the sales or exchanges of real property, located in Oklahoma by either the servicemember or spouse.
  • Income received from all sources of wagering, games of chance or any other winnings from sources within Oklahoma by the servicemember.
*This does not include personal service business income earned by the qualifying nonresident spouse.  Examples of personal service business income include the business of a doctor, lawyer, accountant, carpenter or painter (these are examples only, and are not intended to be exclusive or exhaustive).  A personal service business generally does not include any business that makes, buys, or sells goods to produce income.
Question 3:
I am stationed in Oklahoma and my wife and I are both legal residents of State X (not Oklahoma). My wife worked in Oklahoma and qualifies for the protection afforded to nonresident military spouses under the Act. We have no other income earned in Oklahoma or from Oklahoma sources. How do we file for a refund of the Oklahoma income tax which was withheld from my spouse’s wages?

Note:  Remember wages earned by your nonresident spouse are not considered Oklahoma source income and are not subject to Oklahoma tax. For more information on Oklahoma source income see question #2 above.

Answer:
Fill out the top portion of the Form 511NR according to the “Top of Form Instructions” on pages 6 and 7 of the packet. Be sure and check the box “Not Required to File”.  Complete lines 1 through 19 of the Federal amount column as per your Federal income tax return. Do not enter anything in the Oklahoma amount column. Complete lines 40 through 55 that are applicable to you. (Do not complete lines 20 through 39.)

Sign and mail in the Form 511NR, pages 1 and 2 only. Do not mail in pages 3 and 4. Include page 5 only if you have an entry on line 49 “Donations from your refund”. Be sure to include a copy of your military W-2, your spouse’s W-2, your Leave and Earnings Statement (LES), your Federal income tax return and your resident state’s return.


Question 4:
I am stationed in Oklahoma and my wife and I are both legal residents of State X (not Oklahoma). My wife worked in Oklahoma and qualifies for the protection afforded to nonresident military spouses under the Act. We have at least $1,000 of gross income from Oklahoma sources (such as rental or royalty income; see question #2 above for more examples of Oklahoma source income). How do we complete our Oklahoma income tax return?

Note:  Remember wages earned by your nonresident spouse are not considered Oklahoma source income and are not subject to Oklahoma tax. For more information on Oklahoma source income see question #2 above.

Answer:
Complete the Form 511NR according to the 511NR instructions, with the exception of your wife’s wages. Her wages are the only item of income which will be treated differently than provided for in the instructions. Do not enter her wages on line 1 of the Oklahoma Amount column as the instructions indicate; however, her wages will still be entered in the Federal Amount column as instructed.  Enter any Oklahoma withholding shown on the W-2 on line 42. Complete the remainder of the return as per the instructions.

When you file your return, be sure to include a copy of your military W-2, your spouse’s W-2, your Leave and Earnings Statement (LES), your Federal income tax return and your resident state’s return.


Question 5:
I am an Oklahoma resident civilian married to a nonresident servicemember. Can I change my State of legal residence to my nonresident servicemember’s state and thereby qualify for the protection provided for under the Act?

Answer:
No, a spouse cannot pick and choose their State of legal residence/domicile.  Domicile is the place established as a person’s true, fixed and permanent home. Oklahoma domicile, once established, is presumed to continue unless an individual can show a change has occurred. To effect a change of domicile there must be (a) actual abandonment of the first domicile, coupled with (b) the intention not to return to it and (c) actual residence (physical presence) in another place with intention of making it a permanent home.

One is presumed to retain his Oklahoma residency/domicile if he has:

  • An Oklahoma Homestead Exemption;
  • His family remains in Oklahoma;
  • He retains an Oklahoma drivers license;
  • He intends to return to Oklahoma; or
  • He has not abandoned his Oklahoma residence.

Question 6:
I am a servicemember whose State of legal residence is State A. Before, being stationed in Oklahoma, I was stationed in State B. While stationed in State B, I met and married my spouse. Can my spouse choose/adopt State A as her State of legal residence and thereby, qualify for the protection provided for under the Act?

Answer:
No, a spouse cannot pick and choose their State of legal residence/domicile. See response to question #5 above.


Question 7:
I am a servicemember whose State of legal residence is State A. While stationed in Oklahoma I met and married my spouse. Is my spouse able to choose/adopt State A as her State of legal residence and thereby, qualify for the exclusion provided for under the Act?

Answer:
No, the spouse does not “inherit” the State of legal residence/domicile of the servicemember upon marriage. See response to question #5 above.


Question 8:
If the servicemember has a permanent change of duty station (PCS) and the nonresident spouse remains in Oklahoma, does the spouse lose the protection provided for under the Act?

Answer:
Yes, the spouse must be in Oklahoma for the sole purpose of being with the servicemember. If the servicemember is transferred and the spouse remains in Oklahoma, this qualification is no longer met.


Question 9:
If the servicemember has a temporary duty assignment (TDY), such as a deployment to a war zone, and the nonresident spouse remains in Oklahoma, does the spouse lose the protection provided for under the Act?

Answer:
No, a temporary duty assignment does not change the servicemember’s duty station and therefore does not affect the protection afforded to the spouse under the Act.


Link: Form OW-9-MSE: Annual Withholding Tax Exemption Certification For Military Spouse

 

 

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Last Modified 6/17/2011

 

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