TAXES 17-29, Military Spouse Residency Relief Act

TAXES 17-29, Military Spouse Residency Relief Act

Published: October 4, 2017
Effective: Pay Period 12, 2010

Summary

The Military Spouses Residency Relief Act (MSRRA) (Public Law 111-97) was signed into law on November 11, 2009. MSRRA allows spouses of military personnel to withhold State and local taxes based on an address other than their duty station or residence address documented in the Payroll/Personnel System (PPS).

This bulletin can be accessed on the National Finance Center (NFC) Home page under Tax Information. Refer to the Resources section below for location.

Implementation

MSRRA Phases

To meet the requirements for MSRRA, NFC has a process to allow spouses to withhold State taxes based on an address other than their duty station or residence address documented in PPS.

Note: It is the responsibility of the employing Agency to verify that the employee meets the criteria under MSRRA to withhold State taxes based on an address other than their duty station or residence address currently documented in PPS. There are no edits in PPS to validate this entitlement.

PPS

Special Employment Programs Code MS (Military Spouse Special Tax Processing) identifies employees who meet the entitlement of MSRRA. Special Employment Programs Code MS allows NFC to accept a State tax document for any State even if it is not the employee's duty station or residence address as documented in PPS.

Processing Procedures for MSRRA

Employing Agencies must apply the following steps prior to the processing of a new State tax document for an address other than the employee’s duty station or residence address currently documented in PPS:

  1. Process the appropriate personnel action as indicated below.
    1. Current Employee − Process an Update Action (Nature of Action Code (NOAC) 006, Update) to the last NOAC to update the Special Employment Programs Code field on the employee’s personnel database record with MS.
    2. New Hires and Reassignments − Process the accession personnel actions for new hires and reassignments and include MS in the Special Employment Programs Code field.

      Note: When processing a new hire, steps 2 - 5 are not necessary.

  2. Confirm if an employee has a current State tax record on the database by accessing the Information/Research Inquiry System (IRIS) Program IR105, State Tax.
  3. Submit a cancelation State tax document to cancel the current State tax record on the database if it is not the State for which the employee wants State taxes withheld. The current State code must also be entered. Based on the entry system used by your Agency, the following must be applied to cancel a State tax document:
    • CAN is entered in the Total Number of Allowances field in the Web-based Entry Processing Inquiry and Correction System (EPICWeb).
    • CAN is entered in the Total Number of Allowances field in EmpowHR.
    • CAN is transmitted in the State Tax Number of Exemptions data element in the Front-End System Interface (FESI), State Income Tax Certification (140) record layout.
  4. Confirm the NOAC 006 has applied Special Employment Programs Code MS to the employee’s personnel database record on IRIS Program IR102, Dates & Misc Sal/Pers Data. Special Employment Programs Code MS is what will allow employees to have taxes withheld for a State other than their duty station or residence State in the PPS.
  5. Confirm the current State tax record has been canceled, if applicable.

    Tip: If the current State tax record is not canceled and another State tax document is processed, it will result in a dual State tax record. Verify the State tax cancelation has applied to the database by accessing IRIS Program IR105. A 0 (No) will be displayed in the Duty Station Status field, and the Withholding State Code/Name field on IRIS Program IR105 will be blank.

    Note: Although these steps can all be completed in the same pay period, the personnel action being processed to update the Special Employment Programs Code field on the employee’s personnel database record with MS must be processed prior to submitting a cancelation State tax document to cancel the existing State tax record on the database. Steps 4 and 5 above can be confirmed after steps 1 and 3 have been processed.

Once steps 1 through 5 have been completed or confirmed, employing Agencies may process the new State tax document.

History Correction Update

If an employing Agency changes personnel history data through a history correction update after MS has been applied, the history correction update will cause the MS action to be removed from the employee’s personnel database record. Therefore, the employing Agency must again update the Special Employment Programs Code with MS.

Recalculation of New State Tax Rate

If an employee has already had State taxes withheld based on a residence address or duty station prior to acceptance of the new State tax document, the employing Agency can submit a request through the Web-based Special Payroll Processing System to have the previously withheld taxes recalculated at the new State tax rate and transferred, or if applicable, request a refund of an overpayment.

Resources

To locate the Military Spouse Residency Relief Act bulletin, go to the HR and Payroll Clients page from the MyNFC drop-down menu on the NFC homepage. Select the Publications tab. Select Taxes from the Tax Information menu to view the desired bulletin.

Inquiries

For questions about NFC processing, authorized Servicing Personnel Office representatives should contact the NFC Contact Center at 1-855-NFC-4GOV (1-855-632-4468) or via the ServiceNow Customer Service Portal (CSP).