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Military Spouses Residency Relief Act: Payroll taxes

Friday, December 11, 2009

Military Spouses Residency Relief Act: Payroll taxes

While the spouse of a servicemember is no longer subject to Personal Income Tax (PIT) withholding and may exclude from California income any personal service income — beginning with the 2009 taxable year — the spouse is still subject to California employment taxes (unemployment insurance, employment training tax, and state disability insurance). According to the EDD, the spouse performed services in California and is, therefore, still subject to employment taxes. (E-mail to Spidell Publishing, Inc.® dated December 8, 2009)

The EDD is in the process of revising Form DE 4, Employee’s Withholding Allowance Certificate, for spouses to provide to their employers to be exempt from PIT withholding. Employers no longer need to report PIT wages or PIT withholding for these employees, according to the EDD.

The January 2010 issue of Spidell’s California Taxletter® will include a special section on the taxation of California and non-California military.

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This information is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice and assumes no liability whatsoever in connection with its use. Because tax laws are constantly changing, and are subject to differing interpretations, we urge you to do additional research before acting on the information contained in this document.

Original material in Spidell's California Taxes On-Line is copyrighted and may be reproduced for educational purposes or quoted by crediting Spidell's California Taxes On-Line.

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