I just finished all of the information input for our federal return through TurboTax Deluxe. I went ahead to state as it prompted, however, I am active duty military with Washington as state of residence, so I do not have to file a state return. My wife is a legal resident of Wisconsin and earned income there prior to our move in June 2009. We are filing joint for federal, but for her state return it is including all of my information, such as taxable income, etc. What I'm trying to determine is (1) why is it considering my income as taxable to Wisconsin, when she is the only one who is a Wisconsin resident for tax purposes? (2) is it possible/legal and would it be more simple to file federal jointly and she just file her Wisconsin state return separately?

Your wife is a part-year resident of WI, and so owes taxes on her income for the 6 months that she lived there. The program should prompt you for the information necessary to complete the part-year resident tax form for WI, and you will owe taxes on the portion of income attributable to WI. To do that, you must provide information on all your joint income - the program calculates WI tax at first as if all income is taxed, then it multiplies that by the percentage of your income that is WI-sourced, So you end up paying tax only on her portion of income from WI, but at a tax rate that is determined by your total joint income. Hope this helps.