MONTANA
separate property state

 

Military Income:  Military income is exempt.  BUT separations pay and early out incentive pay are taxable. 

Military Filing Requirement:  Yes, a Montana tax return must be filed to maintain residency.

Military Spouse Residency Relief Act;  Annually, file Form MSR - Employee Certificate of Status to stop Montana taxes from being withheld from their wages.

Forms Used:  MT 2

Filing Status:  Married or separate.  Married persons who are domiciles of different states MUST file separate.

Attach Copy of Federal Return:  No

Not Taxed: 

Other State Tax Credit:  Available.  Attach Montana Form 2A (Page 6) and copy of other state return.

Reciprocity StatesNorth Dakota.

Where to Mail:
Refunds: Tax Due:
Department of Revenue
P O Box 6577
Helena MT 59604-6577
Department of Revenue
P O Box 6308
Helena MT  59604-6308
Refund Inquiry:  (406) 444-9840 Forms:  (406) 444-6900
General Information:  (866) 859-2254 Website: revenue.mt.gov
Other Info: Electronic Filing:  (406) 444-3627

Montana Department of Revenue
P O Box 5805
Helena, MT  59604-5805

 
E-filing Info:  Montana has no E-File signature form.  ERO's should give all supporting documents to Taxpayer and tell them that they should hold for five years.
Tax Form Instructions:
Resident Instructions Non-Resident Instructions

 

Filing Status Scenarios

1.  Taxpayer and Spouse Residents (Use also for Single Taxpayer)
2.  Taxpayer and Spouse Different States of Residence
3.  Taxpayer and Spouse Non-Residents
4.  Taxpayer Non-Resident - Spouse Part-Year Resident
5.  Taxpayer Married or Single - Resident but Income from Other State
6.  Amended Return

 

1.  Taxpayer and Spouse Residents (Use also for Single Taxpayer) - Taxpayer and spouse are both Montana residents, lived at their present location all year, and one or both had income.

Main Info Screen.

 

W-2 Form.  Montana does not tax military income.  To exclude the military income properly you must check the Military box on the bottom of the W-2 form for the military member's income.

Montana Form 2.  A joint resident Montana income tax return is prepared.  Married couples may file joint, separate on the same form or separate on separate forms, whichever is the best tax advantage.  Check all three options to see which one benefits the taxpayer more.  In this example, the largest refund was given by filing married filing joint return. 

 

Montana Form 2, Pg 5, Schedule II - Montana Subtractions from Federal Adjusted Gross Income.  Review this form to ensure that the military income is exempted on line 8.

Complete all other fields and forms with red or required information. MILITARY MEMBERS ARE NOT ALLOWED TO E-FILE THEIR RETURNS. THEY MUST SEND IN THEIR RETURN ALONG WITH A COPY OF THEIR ORDERS SHOWING THEY ARE ON ACTIVE MILITARY DUTY

2.  Taxpayer and Spouse - Different States of Residence - Taxpayer or spouse is a resident of Montana, while the other member is a resident of a different state.  A Montana income tax return must be prepared due to the taxpayer or spouse having Montana earned income.

Main Info Screen.  For Montana, married persons who are domiciles (residents) of different states MUST file "Married and both filing separate on separate forms". For this example, the taxpayer is a resident of Montana while the spouse is a resident of North Dakota.  If they claim a military exemption, they must attach a copy of their military orders to the tax return and this return should not be e-filed. 

 

W-2 Form.  Montana does not tax military income.  To exclude the military income properly you must check the Military box on the bottom of the W-2 form for the military member's income.

Resident/Nonresident Worksheet.  Review form to ensure income is split correctly for the appropriate states.

 

Montana Form 2.   A married filing separately, resident Montana income tax return is being prepared.  Filing Status 3b should be checked.  As this will be a married filing separately tax return, an exemption for the spouse can not be taken.  You will have to override Line 6b under exemptions to remove the spouse's exemption, the spouse's name and SSN from the top of the form. 

 

Montana Form 2. You will also have to override Line 7, Column A so that the Montana resident's (taxpayer/military member's) income is the only income listed.  This amount can be taken directly off of the W2 form.

 

Montana Form 2, Pg 5, Schedule II - Montana Subtractions from Federal Adjusted Gross Income.  Review this form to ensure that the military income is exempted on line 8.

 

Complete all other fields and forms with red or required information. MILITARY MEMBERS ARE NOT ALLOWED TO E-FILE THEIR RETURNS. THEY MUST SEND IN THEIR RETURN ALONG WITH A COPY OF THEIR ORDERS SHOWING THEY ARE ON ACTIVE MILITARY DUTY

3.  Taxpayer and Spouse Non-Residents - Taxpayer and spouse are residents of a different state.  The spouse and taxpayer must file a Montana tax return due to one or both having Montana earned income.

Main Info Screen.  If both members are residents of another state, the parties should file as nonresidents.  For this example, the taxpayer and spouse are both residents of Wisconsin but must file a Montana income tax return because the spouse worked in Montana.

 

Resident/Nonresident Worksheet.  Review form to ensure income is split correctly for the appropriate states.

 

Montana Form 2.   A married filing joint non-resident Montana income tax return should be prepared.   Married couples may file joint, separate on the same form or separate on separate forms, whichever is the best tax advantage.  Check all three options to see which one benefits the taxpayer more.  In this example, the largest refund was given by filing married filing separate returns on the same form. 

 

Montana Form 2, Page 7, Schedule IV - Nonresident or Part year Resident Tax Computation will be generated.  This form is used to subtract out the other-states (Wisconsin) income. 

Review the remainder of the Montana Form 2 to ensure the other state income is being subtracted correctly.  Complete all other fields and forms with red or required information.

4.  Taxpayer Non-Resident - Spouse Part-Year Resident - Taxpayer and spouse moved to or from Montana during the tax year.  The taxpayer is a resident of a different state.  The Spouse is a part-year resident of Montana.  The Spouse and taxpayer must file a Montana tax return due to one or both of them having Montana earned income and possibly income from another state.

Main Info Screen.  For this example, the taxpayer is in the military and a resident of Indiana.  The taxpayer and spouse moved from Montana to North Dakota during the year.  The spouse was a resident of Montana but is now changing their residency to North Dakota for tax purposes.  The spouse therefore was a part-year resident of both Montana and North Dakota and must file a Montana income tax return because the spouse worked in Montana.

 

Part Year Resident States Worksheet.  Review form to ensure income is split correctly for the appropriate states.

 

Montana Form 2.   Married couples may file joint, separate on the same form or separate on separate forms, whichever is the best tax advantage.  Check all three options to see which one benefits the taxpayer more.  In this example, the largest refund was given by filing married filing separate returns on the same form.  You will need to complete the residency information, as in the example.  If dependents are listed on the return you will need to supply the Relation code.

 

Montana Form 2, Page 7, Schedule IV - Nonresident or Part year Resident Tax Computation will be generated.  This form is used to subtract out all the other-states (Indiana and North Dakota) income. 

Review the remainder of the Montana Form 2 and 2A to ensure the other state income is being subtracted correctly.  Complete all other fields and forms with red or required information.

5.  Married or Single Military Resident of Montana with Income from Another State  - Taxpayer is single or married.  The taxpayer must file a Montana tax return due to him or her having Montana earned income.

Main Info Screen.  For this example the taxpayer is a military member stationed in North Dakota but a resident of Montana.  The taxpayer had a job in North Dakota therefore having North Dakota earned income.  If they claim a military exemption, they must attach a copy of their military orders to the tax return and this return should not be e-filed. 

W-2 Form.  Montana does not tax military income.  To exclude the military income properly you must check the Military box on the bottom of the W-2 form for the military member's income.

Resident/Nonresident Worksheet.  Review form to ensure income is split correctly for the appropriate states.

Montana Form 2.  A resident Montana income tax return is prepared.  Montana taxes residents on income from all sources (except military pay) even income earned while living in another state (North Dakota as in this example).  

Montana Form 2, Pg 5, Schedule II  - Montana Subtractions from Federal Adjusted Gross Income.  Review this form to ensure that the military income is exempted on line 8.

Montana Form 2, Page 8 - Schedule VI.  Montana Form 2, Page 8 must be added to the tax return.  Schedule VI - Credit for an Income Tax Liability Paid to Another State or Country must be prepared to give a credit for taxes paid to another state (North Dakota). You must complete the other states tax return first, then enter the amount of tax from the other states tax return.  This is not the amount the taxpayer had withheld from his or her pay but the amount of tax imposed on them.  Line 1 and 2 are the amount of income earned in the other state (North Dakota).  Line 4 is the amount of income tax liability on the (North Dakota) tax return.  If the credit is given then a copy of the other state's return must be attached to the Montana return if not e-filed.

Complete all other fields and forms with red or required information.MILITARY MEMBERS ARE NOT ALLOWED TO E-FILE THEIR RETURNS. THEY MUST SEND IN THEIR RETURN ALONG WITH A COPY OF THEIR ORDERS SHOWING THEY ARE ON ACTIVE MILITARY DUTY

6.  Amended Return  - An amended Montana return must be filed because the taxpayer received new tax information after their Montana return was filed.
Federal 1040X Form.  Before making any changes to the tax return add the US 1040X form to the tax return.  You must check the box under Income and Deductions to lock in the entries in Column A - Original amount or as previously adjusted.

Montana Form 2.  The same Montana Form 2 that was used to file the return is used to amend the return.  You must check the box to lock in the original refund or balance due before making any changes to the return.

Make whatever changes are required to the federal tax return.  For this example, a new W-2 was received.

Montana Form 2.  Return to the Montana 2 Form, Page 3 to determine if the taxpayer is receiving an additional refund or owes money.  You must enter an explanation for why the Amended Return is being prepared. 

Amended returns can not be e-filed.  The taxpayer must mail the federal 1040X and any state amended returns if required to be filed.