Will I owe any California income tax?

Forum|Forum|4 years ago
August 30, 2022
16 replies
539 views

I currently work a job based out of New York city but work remotely out of Texas. As New York State taxes remote employees, I have to pay New York State income tax along with federal income tax. Texas does not have a state income tax.

I am thinking about spending a month later this year working remotely out of California as well and was just wondering if there will be any tax implications for doing so? Will I owe any California income tax if I do this?

Best answer by Anonymous_

If you are not a California resident, do not have California source income, and are not availing yourself of clients in California (e.g., not providing services to a California firm or clients), then there should be no California income tax implications.

Anonymous_Answer

Level 15

rjs

Level 15

However . . . When you say you will be "working remotely out of California" do you mean that you will be physically in California, working remotely for the New York company or some other remote employer? If that's what you mean, any income that you earn for work that you do in California is California source income. You do have to pay California tax on any income that you earn for work that you do in California, no matter where the employer is located or where your permanent residence is, and no matter how long or short a time you spend in California.

bcbkakljdasdasAuthor

Level 2

I see. Thank you for the responses. Yes that situation does apply to me so it seems like I might owe some income tax.

Say my annual gross income is $100,000 and I spent 4 of the 52 weeks in the year working in California. Will I owe California state income tax as if I only made $100,000*(4/52)=$7692.31 in the year, which would be very minimal, or will I pay a certain percentage of the tax from the total income tax I had for the year which was on a gross income of $100,000?

Hal_Al

Level 15

Q. Will I have to file a CA return and owe any California (CA) income tax if I work remotely in CA on a temporaray basis?

A. Yes, but "nobody" does*. See http://money.cnn.com/2013/06/28/pf/taxes/business-traveler-tax-threat/

Even if you do decide to file a CA return, CA will give you a credit for the tax you paid to NY on the same income ($7692).

Q. Will I owe California state income tax as if I only made $100,000*(4/52)=$7692 in the year?

A. Yes.

*If you live in a state without an income tax (e.g. FL or TX), and your employer was located there too, it’s more likely you should file in the work location state (CA). You can't use the "it all comes out even" rationale for not filing.

Opus 17

Level 15

You don't specifically say, but are you an independent contractor or a W-2 employee?

If you are an independent contractor, the source of your income is determined (for CA purposes) by where your customers live. If you have no CA customers, then temporarily working from CA does not subject you to CA income tax.

However, if you are a W-2 worker, the source of your income under CA tax law is determined by where you are living or working when you perform the work. See here. https://www.ftb.ca.gov/about-ftb/newsroom/covid-19/help-with-covid-19.html#Residency-and-income-sourcing

Although this is a FAQ for COVID, I believe the principles are a permanent part of CA law.

Generally, you owe income tax to the place where you perform the work. You also owe income tax to the place where your permanent residence is located (but not if you live in TX). In this case, you would file a non-resident return for CA to only report the portion of your income earned while living or working in CA.

You might get away with it, if the FTB doesn't know you are there. But the law seems to be that you owe CA income tax.

Income sourcing for nonresidents temporarily relocated to California, and filing and paying California income taxes during COVID-19

Scenario 1: You work for an out-of-state employer and receive a W-2 from them. You temporarily relocate to California. Do you need to file a California return and pay California income tax?

Answer: Yes. As a nonresident who relocates to California for any portion of the year, you will have California source income during the period of time you performed services in California. You will need to file a California Nonresident or Part-Year Resident Income Tax Return (Form 540NR) return to report the California sourced portion of your compensation. One way to calculate the portion of your income that is California sourced is to multiply your total amount of income for the year by a ratio of your total number of days performing services in California over your total number of days performing services worldwide.