OK, I need to say something to everyone... DO NOT put trust in ANY advice you see on this Intuit/Turbo Tax discussion board regarding your specific tax situation. The last thing you want to do is to use a statement/comment being made by a non-tax expert to determine what you should do. Especially if you are facing a difficult tax situation, seek out an expert to guide you. My wife received a letter from the California FTB that indicated, even though she was a resident of Michigan for the full year, she owed California tax on her income since most of her clients are located in CA. Specifically, my wife operates a home-based medical transcription business in Michigan. She never steps foot in California. However, per CA tax law, since she provides a service to CA-based businesses, it is deemed CA sourced income. Because of that, my wife has to file a CA (non-resident) tax return as well as pay income tax to CA. Does the situation suck? Yes, absolutely it does! But when the California FTB sent my wife a letter informing that she owed taxes, we initially did not believe it could be valid. So we challenged it. After talking to two tax experts who researched the situation heavily, ultimately learned that my wife did indeed owe CA tax on the income that she makes from individuals/businesses who are in CA. The only good news in this scenario is that my wife does not need to pay Michigan tax on that same income - but it sucks nonetheless to have to file two state income tax submissions and pay income tax to two different states (with CA tax rates being much higher than MI, of course) even though all my wife's work is being done in Michigan.