California non-resident self employment income rate

[abholcomb]

I live in Washington and earn non-resident SE income in CA. I also earn SE income in WA. In TT state, it asks amounts of income from CA sources vs. all sources. I thought it would increase my refund, since that means more tax was taken from only part of the income. Surprisingly, once I enter amounts for WA state income, my refund drops. Would that mean that my tax rate for CA income is then higher? Am I entering wrong info?

[ErnieS0]

I’m not understanding your question. You should not be entering Washington self-employment income on a California non-resident return.

On the screen California Business Income or Loss, TurboTax will ask for the California Amount. That is the amount of self-employment income earned in California.

[abholcomb]

Hi Ernie,

Thanks for your answer. I'll clarify. I didn't enter all income to the CA form, TT automatically transfers all of our information from the Federal return to CA non-resident return. We have both W-2 and SE income as California non-residents. Then it asks what portion is earned as a CA non-resident. All the W-2 was CA, 70% of self-employment income was in CA, 30% of self-employment was in WA. So for instance, not real amounts, but general idea:

All income/all sources $100,000- CA refund shows $6,000

Answer TT question how much W-2 is in CA:  all $50,000 W-2 is CA - refund stays the same

Answer TT question how much SE is in CA:  $35,000 is CA, $15,000 is WA - refund drops to $3,500

Why would I get a bigger refund from a bigger overall total which included WA income? Wouldn't it make sense to owe less on less earnings, therefor even bigger refund? Thank you!

[AmyC]

The most sensible is a loss of credits. There may be credits on your return that are dropping as your CA income  is reduced. CA looks at your total income as if a full year resident. This means tax is calculated as if you were a full year resident and then prorates the tax using the ratio of resident income divided by total income.

[abholcomb]

Hi Amy,

Thanks for your reply. I guess that makes sense, although I don't completely understand the credits. So even though I had already entered in TT that all CA income was as a non-resident, it is still basing calculations on the possibility that some of the year was as a resident? Still doesn't seem right. Once the non-residency is established, the credit factor should not change. Just was wondering if there was an error in TT calculations.

[AmyC]

Let me try again! 

Prorate as full year resident example:

Total Income $100,000 

CA taxes $100k = tax is $4413

CA income is $10,000 or 10%,  thus CA actual tax liability is $441