According to www.army.mil, "On November 11, 2009, the President signed into law the Military Spouse Residency Relief Act. This Act, among other things, provides that when a service member leaves his or her home State in accord with military or naval orders, the service member's spouse may retain residency in his or her home State for voting and tax purposes, after relocating from that State to accompany the service member. In the State of Alabama, an exemption from Alabama withholding tax may be claimed if an employee’s spouse is a member of the US Armed Services and their state of legal residence is not Alabama."
In order to be eligible for the exemption Under the MSRRA the following three conditions must be met by the military spouse:
- The servicemember spouse of a US Armed Service is present in Alabama in compliance with military orders.
- Resides in Alabama solely to live with the servicemember spouse,
- Maintains domicile in another state with servicemember spouse.
If the military spouse meets the eligibility requirements, the employee should provide their employer with a current valid military identification, Form DD-2058 (reflecting the servicemember’s state of legal residence) and a current Leave and Earnings Statement.
To claim tax-exempt from Alabama withholdings:
Please complete the Form A4-MS Nonresident Military Spouse Withholding Tax Exemption Certificate, if you are claiming exemption from Alabama’s income tax withholding requirements based on the conditions set forth under the Military Spouses Residency Relief Act (P.L. 111-97).
To claim a refund of taxes withheld from your Alabama income, follow these steps in the program:
- State Section
- Edit Alabama Non-Resident Return
- Basic Information - enter State of Residency
- Answer, "Did you file a return with your legal resident state for 2023?"; if No, give reason why.
- Income Subject to Tax - enter Wages for the Military Spouse
- Save - Exit Alabama State Return.
To correct the W-2:
- Federal Section
- Income (Enter Myself)
- Wages and Salaries
- Edit the military spouse W-2
- Remove the dollar amount in Box 16, leave information in Box 17
- Click Continue to Save.
- A copy of Form DD2058 should accompany the return. This form is not included in the program or e-file.
Military Spouse income may be taxable on your state return where you file as a resident.