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Administrator Guide
Last Updated: 2024-05-03
Exempt Military Spouses from Residence State and Local Taxes (USA)

Exempt Military Spouses from Residence State and Local Taxes (USA)

  • Make sure the worker's work address reflects the actual work state.
  • Update the home address to their current residence.
  • Security:
    Worker Data: Payroll (Company Specific) - USA
     domain in the USA Payroll functional area.
When the spouse resides with the member of the military, the Military Spouse Residency Relief Act exempts spouses from state and local taxes for that state. When you set up the exemption, Workday deducts taxes for their Domicile State instead.
Midperiod changes to a worker's Domicile State results in gross-to-net proration.
Workday doesn't support exempting military spouses from residence state and local taxes for workers who have an international assignment position in the U.S.
  1. Access the
    Add Worker US Tax Elections
     task, and enter the State of Domicile in the
    Additional State
     field.
  2. On the
    State
     tab, select the
    MSRR Exempt
     check box for the state where worker is residing with their spouse.
  3. For the
    Domicile State
    , select the state of permanent residency where the worker actually pays state and local taxes.
Workday withholds taxes from the Domicile State. Workday keeps track of withholding for states that require a W-2 report even though the employee is exempt.
Run the
Payroll Multistate Withholding Rules
 report. The
Accumulate Wages for Employees Claiming Military Spouses Residency Relief Exemption
 column displays
Yes
 when a state requires accumulation of wages for employees claiming MSRR exemption.
Run the
Expiring Exempt Tax Elections
 report to keep track of MSRR exemption elections that might be near expiration.
These web services include the MSRR exemption election:
  • Put Payroll USA State and Local Tax Elections
  • Get Payroll USA State and Local Tax Elections