In the past year, legislation has changed two major things concerning military spouse laws. Here’s what you need to know about the updates to the military spouse hiring preference and the Military Spouse Residency Relief Act.
Military spouse hiring preference: What has changed?
In 1989, President George H.W. Bush signed an executive order authorizing the Department of Defense to designate federal jobs that were eligible first to qualified military spouses. This didn’t guarantee jobs for spouses, but it could help them find jobs in the federal government.
Libby Jamison, a military spouse and cofounder of Mission License, explains how this law was updated this year:
“Under the old Preferred Placement Program you had to go on base and contact the local office to learn which jobs you qualified for, which was often frustrating and limiting. In May 2018, President Trump signed Executive Order 13832: Enhancing Non-Competitive Civil Service Appointment of Military Spouses.
“Applying is now all done online through USAJobs. They have merged the noncompetitive DoD hiring process with the PPP to open it to additional federal jobs and agencies besides the DoD. You can filter and select jobs by those that are hiring military spouses. This gives spouses more control over the process, because now you can decide what you are qualified for and how to best match your qualifications.”
The new law removes the former time limits. Spouses used to have only two years after a Permanent Change of Station move to benefit. This often was not enough time, especially for families who joined the service member months after the PCS date.
The only limitation now is that spouses can accept only one offer of permanent federal appointment per duty station.
This means new spouses can use the benefit without PCS orders. To qualify, military spouses in the commuting area of their service member’s duty station need proof of marriage, proof of active duty status and proof of residency with the service member.
Jamison reminded spouses, “it may not be enough to just apply through USAJobs. You still need to network. There is still a benefit to going into the local base Family Center and finding those local connections. I think it’s great you can do it online, but don’t rely on that.”
To learn more about the spouse hiring preference program, people should visit Military One Source or their base employment office. Hiring Our Heroes also has military spouse professional networks that can be helpful, especially if people talk to someone who went through the process in a specific location.
Military spouse laws: What do we need to know about taxes?
The Military Spouse Residency Relief Act essentially gives military spouses the opportunity to choose which state they file taxes in — the state in which they reside with their service member, or the one in which they are legally domiciled.
In December 2018, Section 302 of the Veterans Benefits and Transition Act of 2018 was modified. Candice McPhillips, a military spouse, and founder and attorney of McPhillips Law LLC explained:
“The VBTA eliminates the prior MSRRA requirement that both the military service member and the milspouse share the same legal domicile in order to take advantage of the milspouse tax exemption. A military spouse can use the MSRRA every time he/she changes states on PCS orders provided the couple moves to a state that is not already the legal domicile of the military spouse.”
There are restrictions on which types of taxable income are exempt. Rental income from property is generally taxable in the state where it is located. A spouse’s income from self-employment may not qualify for the exemption, depending on the business’s number of employees and partners.
Military spouses will still retain their one state of legal domicile for all purposes other than taxes and voting even if they choose to take advantage of the MSRRA.
Unfortunately, the updates caused confusion this tax season. Each state has different regulations, and the states don’t coordinate with each other. Every state wants to tax their eligible income, based on a family’s federal tax returns. This means it is up to military families to inform all their resident and domicile states where they filed.
One complicating factor is that states differ on whether you must file as “resident” or “nonresident” status if you are living outside your state of domicile. Some states treat a person as a nonresident if they are living outside the state for a certain number of days — commonly 183 — during the tax year. This affects what income each state considers taxable.
McPhillips explains why this is causing problems.
“The new law has resulted in a lot of confusion even for CPAs, tax preparers and attorneys. States differ in the paperwork they require for an exemption under the new MSRRA. Some require a complete copy of the taxes filed with the other state, along with supporting legal documents. Most states have not updated their websites or information booklets for military personnel at all. Various exemption codes may need to be entered on the state return. These codes are usually not obvious in most tax preparation software, particularly the free software available to taxpayers.”
Military spouses must research their options under the MSRRA. First, military spouses wishing to use the exemption should contact their employer and ensure their withholding certificates show the correct state. The military spouse may also need to submit a new withholding exemption certificate — a form provided by the state — to their employer.
For guidance, begin with the domicile state website. Look at the military personnel page on the site. Read the state instruction booklet for residents and nonresidents. Find a free source online for the state tax statutes, which may be in an administrative article, and look for a military provision.
If anyone is uncertain which state(s) they need to file taxes with, look for a tax preparer or CPA who is familiar with military spouse laws. Tax professionals may need to research the state tax statutes and other guidance to give accurate advice. These issues become even more complex when military spouses earn income overseas.
If someone has previously filed with one state, then switched to a new state, it is likely the original state will contact you about unpaid taxes. McPhillips expects that many states will send letters this summer to military families who qualified for the exemption but didn’t properly communicate with each state.
She said, “If you receive a notice, don’t expect it to go away on its own. It’s important to immediately act, contact the state and ask why it was sent. If you didn’t follow instructions correctly, take that problem to a professional to fix it. You probably need to mail documents showing spouse status and taxes from other states.”
The state tax exemption for military spouses may sound complicated, but remember that it is there to protect spouse income from being simultaneously taxed by multiple states. Research and professional advice may save many military families a lot of money.
