When can a nonresident military spouse exclude Kansas service income?

Plain-English summary

A qualifying nonresident military spouse could exclude Kansas income from services beginning with tax year 2009. The servicemember had to be in Kansas under military orders, the spouse had to live in Kansas solely to be with the servicemember, and neither spouse could be a Kansas resident.

The relief covered the spouse's service income, including wages and salary. It did not exempt the servicemember's nonmilitary Kansas income. A spouse with 2009 withholding or estimated payments could seek a refund on Form K-40; prior-year payments carried into 2009 were not refundable under the notice.

A qualifying spouse could file Form K-4 with the employer for withholding relief. Kansas-resident spouses living elsewhere with a servicemember remained taxable by Kansas on their income.

What this means for you

This was not a blanket military-spouse exemption. Residency, military orders, the reason for living in Kansas, and the type of income all mattered.

Citations and references

• Military Spouses Residency Relief Act, S. 475
• Kansas Forms K-40 and K-4; Schedule S

Subject

Military Spouse Income-Tax and Withholding Relief

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 09-12

Original ruling text

Kansas Department of Revenue
Office of Policy and Research

                                     Notice 09-12


    SPOUSES OF UNITED STATES MILITARY SERVICEMEMBERS

On November 11, 2009, President Obama signed into law the Military Spouses Residency
Relief Act (S. 475). This act is effective for taxable years that begin on or after January 1, 2009
and all tax years thereafter.

INCOME: Under the new law, the spouse of a military servicemember may be exempt from
Kansas Individual Income Tax for Tax Year 2009 and thereafter on income from services
performed in Kansas if: 1) the servicemember is serving in Kansas in compliance with military
orders, 2) the spouse is residing in Kansas solely to be with the servicemember, and 3) the
servicemember and spouse are not residents of Kansas (the servicemember and spouse are
legal residents of another state of the United States or a foreign country).

Spouses of servicemembers who meet the above requirements and who have had Kansas
withholding on 2009 wages or who have made other Kansas tax payments for Tax Year 2009,
such as estimated tax payments, may receive a refund of these taxes by filing a Kansas
Individual Income Tax return, K-40. The Kansas income tax return can be filed electronically,
using KDOR’s free on-line return – www.kswebfile.org – on or after January 1, 2010. The
spouse’s nonmilitary Kansas income will be subtracted from Federal Adjusted Gross Income.
Only tax payments on 2009 income will be subject to refund. Carry forward of prior years’ tax
payments to Tax Year 2009 are not subject to refund.

The scope of the income subject to refund is limited to “income for services performed by the
spouse of a servicemember” in Kansas. This would include Kansas income from wages, salaries
and business income from “service performed by the spouse”. It would not include, for example,
income derived from Kansas real estate or a trade or business carried on in Kansas that does
constitute “income for services performed by the spouse of a servicemember”.

This law does not exempt any nonmilitary income earned by the servicemember in Tax Year
2009 and thereafter from Kansas income tax. Nonresident servicemember’s military
compensation continues to be exempt from Kansas Individual Income and is also subtracted from
Federal Adjusted Gross Income on line A13 of Schedule S.

WITHHOLDING: The spouse of a military servicemember whose wages/salary is exempt from
Kansas income tax under the above provisions should file a Kansas Form K-4 with their employer
claiming the exemption from Kansas Withholding tax.

Kansas employers should request evidence that the military spouse is indeed a legal resident of
a state other than Kansas. Employers may also want to inquire with military spouses’ state of
residency as to whether the Kansas employer is required to withhold income tax for that state.

Spouses claiming an exemption from Kansas Withholding tax may want to consider the impact
that exemption will have on their income tax liability in their state of residency. They may be
required to make estimated income tax payments to their state of residency in order to avoid
penalties for underpayment of their state’s income tax.

KANSAS RESIDENT:

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  1) Spouses - Kansas residents (who have NOT established residency in another state)

and who are residing outside of Kansas solely to be with their servicemember spouse in
compliance with military orders, and earn income in that other state are subject to Kansas income
tax on the income earned in that other state.

   2) Servicemember - Military compensation earned by a Kansas resident servicemember

is subject to Kansas income tax. Nonmilitary income earned by a Kansas resident
servicemember in Kansas is subject to Kansas income tax. Nonmilitary income earned by a
Kansas resident servicemember in a state other than Kansas is subject to that’s state’s income
tax and is also reported on the Kansas income tax return. If an income tax was paid to that other
state, a credit can be taken on the Kansas income tax return for taxes paid to another state.

TAXPAYER ASSISTANCE: Additional copies of this notice, publications and most forms are
available from our web site, www.ksrevenue.org. Copies of Form K-40, Schedule S and the K-4
are available from KDOR’s Forms Order Line: 785-296-4937. If you have questions, please
contact:

                              Taxpayer Assistance Center
                            Kansas Department of Revenue
                             915 SW Harrison St., 1st Floor
                                Topeka, KS 66612-1588
                                  Phone: 785-368-8222
                                   Fax: 785-291-3614




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