1099 for remote work in various states

Forum|Forum|6 years ago
January 15, 2020
5 replies
78 views

I work remotely as an independent contractor from Maryland for clients in DC, MA, and CA. I am a video editor. Do I have to file as a nonresident in MA and CA? I have been paying estimated taxes in MD but now am realizing since the majority of my freelance work is for out of state clients I probably owe to those states instead. I guess I will pay to CA and MA at tax time and get a refund from MD? I know the general rule is that if you don't go to the other states for the work, you don't owe but sounds like maybe CA and MA are exceptions?

Thanks

Best answer by TomD8

CA may well be an exception.

Due to a 2019 court ruling (known as the Bindley decision), the income of sole proprietors providing services to clients in California may indeed be subject to California taxation, even if the service provider is a non-resident of CA and never performed any work in CA.

You can read the details here: https://www.coblentzlaw.com/california-office-of-tax-appeals-gives-precedential-authority-to-bindley-decision-nonresident-sole-proprietors-out-of-state-services-to-california-customers-could-trigger-california-filing-requirem/

Therefore if you receive a 1099-MISC from a California-based client, the State of California may be looking for you to file a non-resident CA tax return for that income.

HelenC12

Level 15

@katie-turnbloom

@TomD8 is correct. You may have to file a CA income tax return. Per CA.gov: As a nonresident, you pay tax on your taxable income from California sources.

Sourced income includes, but is not limited to:

Services performed in California, or
Rent from real property located in California, or
The sale or transfer of real California property, or
Income from a California business, trade or profession.

Related information:

What is a Tax Home?

[Edited 3-23-2020|8:14 am PST]

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TomD8

Answer

Alumni - Champ

CA may well be an exception.

Therefore if you receive a 1099-MISC from a California-based client, the State of California may be looking for you to file a non-resident CA tax return for that income.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

alo2020

Level 2

Thank you. So I will be able to specify which part of my income was from California?

TomD8

Alumni - Champ

Yes. You'll file a non-resident CA return in addition to your home state MD return. Note that ALL your income is taxable by your resident state of MD, regardless of where earned. MD will give you a credit for taxes paid to a non-resident state on any income that is taxable by both states, so you won't be double-taxed.

In TurboTax, be sure to complete your non-resident return(s) before you do your home state return.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.