I was active duty military for 2020 and was a AZ resident. However, I owed $500 to AZ for taxes. How is this possible if military is exempt from state taxes?

Forum|Forum|5 years ago
March 22, 2021
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BillM223

Did you have income that was not active duty pay in Arizona?

Are you married? Did your spouse have a job in Arizona?

On your federal return, do you have any other income that active duty pay? The Arizona subtraction is only for active duty pay, not anything else.

Are you filing form 140 in Arizona? Line 45 is your Arizona taxable income. What is in this income?

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vribeAuthor

In 2020 I was active duty working in CA as an AZ resident. I separated from the military 12/09/2020. For the last 21 days of December 2020 I was employed in CA receiving income as a civilian.

I am married and my wife was employed all year receiving CA income.

I’m not sure what Form 140 is. Maybe that is where my mistake is.

ReneeM7122

Under MSRRA, your wife is not subject to CA tax while you were on active military duty. If she is an employee, and CA tax was withheld, she will have to file a CA return to get a refund. She worked in CA all year so this does not apply. Since you (and she) are residents of AZ, you will have to file a state income tax return there.

Form 140 is an AZ Resident Personal Income Tax Form filed by resident taxpayers. You may file Form 140 only if you (and your spouse, if married filing a joint return) are full year residents of Arizona or if Your Arizona taxable income is $50,000 or more, regardless of filing status.

Thank you for your service.