topic Work from home part of the year in State tax filing

Work from home part of the year

lisa8191 — Tue, 18 Aug 2020 19:38:38 GMT

I have two questions:

First question-

I'm asking if my understanding of the tax I'm paying is correct:

I recently graduated in TN and planning to start a new position by the end of August for a company based in CA. Due to work from home, I'm planning to move to CA mid-December.

If I separate my income as January - August (1), August - mid-December(2) and mid-December till end of December (3).

I will be filing:

1. TN resident state tax return - (1), (2) and (3)

2. CA resident state tax return -(3)

Since (2) is not a California source income (WFH from TN) so as a nonresident from August - mid-December, I shouldn't have to file.

TN doesn't have income tax, so theoretically, I only need to pay state income tax for (3)?

The second question-

If the HR withheld CA tax for (2) accidentally, do I file nonresident tax return for CA and stated income as 0 for that period to get the withheld tax back?

Re: Work from home part of the year

TomD8 — Wed, 19 Aug 2020 16:02:29 GMT

If you are a W-2 employee (as opposed to an independent contractor), then you are correct that your income earned for remote work done from TN is not subjection to CA taxation.

If you move to CA in 2020, then for 2020 you would file your CA tax return as a part-year resident, not as a non-resident. Income you earn after you become a CA resident is entirely taxable by CA. On that part-year resident return you would report ALL your CA withholdings for 2020, which would include the amount withheld before your move. CA would then refund any excess withholding. Your CA-source income on that return would consist of the amount you earned after becoming a CA resident.

You become a CA resident for tax purposes once you're "in CA for other than a temporary or transient purpose."

Re: Work from home part of the year

lisa8191 — Wed, 19 Aug 2020 15:07:40 GMT

Thank you Tom,

If I will be living in temporary housing provided by the company for about 30 days (will last into 2021). Would I still be nonresident?

If I file as non-resident instead, how would the filing process differ?

Thank you,

Re: Work from home part of the year

TomD8 — Wed, 19 Aug 2020 16:03:49 GMT

I've modified my original answer a bit to fit CA's definition of "resident."

If you're "in CA for other than a temporary or transient purpose", CA considers you a resident for tax purposes. So if you're in company-sponsored temporary housing in CA, but your purpose is not temporary or transient, you'd file as a part-year CA resident. You'd become a CA resident when you move into the company housing.

https://www.ftb.ca.gov/file/personal/residency-status/index.html

Also see: https://www.ftb.ca.gov/forms/2019/2019-1031-publication.pdf

Re: Work from home part of the year

lisa8191 — Wed, 19 Aug 2020 16:44:28 GMT

Thank you Tom,

So based on what you've replied so far. If I plan to move to CA during mid-December, I should do the following for my tax return:

1. File resident tax for TN

-Report all TN withholding (since there's no income tax, there should be no withholding for TN state)

-"Income" will be for full-year (probably doesn't matter too much here)?

2. File part-year resident tax for CA

-Report all CA withholding

-"Income" will only be the California source income (income earned after moving to CA)

This way, I should be able to get the excess CA withholding back if the HR withheld anything before I move to CA.

Does it sound correct?

Thanks,

Lisa

Re: Work from home part of the year

TomD8 — Wed, 19 Aug 2020 16:55:53 GMT

Part (1) There is no tax return to file for TN. TN does not tax earned income. It taxes only interest and dividends above certain amounts.

Part (2) of your question is correct.

Re: Work from home part of the year

lisa8191 — Wed, 19 Aug 2020 18:08:57 GMT

Tom,

Thank you so much!

Lisa

Re: Work from home part of the year

TomD8 — Wed, 19 Aug 2020 19:25:02 GMT

Enjoy your new life in California!