If I live in Michigan and I am MI resident but work remotely for a company in California, do I need to pay California taxes?

Forum|Forum|4 years ago
March 6, 2022
10 replies
71 views

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LenaH

Alumni - Expert

No. You have zero sourced wages to California because the income is sourced to your home state of Michigan. Sourced income means that you physically earned the wages in that state. Per the State of California, you are only responsible for state income tax if you performed services in California for wages.

However, you will have to file a nonresident California return if your employer withheld California state income tax from your wages. In this scenario, California will give you a refund of taxes paid and your home state of Michigan will tax you on the income. Depending on your underpayment to your home state, you might be subject to a penalty. It would be best to have your employer withhold Michigan tax if you continue to plan on telecommuting.

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stw108

Level 2

i live and worked in michigan in 2021 i received a w-2 from a lawsuit settlement from a previous employer in california from 2017 the lawsuit too years to finish. do i need to file in california also? the w-a2 was gross 1,250$

DawnC

Level 15

Maybe. Does the W-2 you received from the lawsuit reference CA in the state tax section (boxes 15-20)? If so, yes, you will need a nonresident CA return to report the California sourced income. The link has instructions if needed. @stw108

This does not apply if you are not otherwise required to file a federal tax return.

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Hal_Al

Level 15

It depends on what "work... for a company" means. If you are a regular W-2 employee; then no, you do not need to pay CA income tax.

If you are independent contractor, e.g. you get a form 1099-NEC, then yes you are subject to CA tax and must file a non resident CA return. MI will also tax that income, but give you a credit, or partial credit, for the tax you pay to CA.

sivam25

Level 2

I am resident of Michigan and stayed in Michigan for entire 2021. I worked in MI company till March 2021 and have W2. I joined a company in California by April 2021 and became regular W-2 employee of that company. I never visited CA in 2021 though and continue to stay and own home in MI and worked remotely. CA company issued me a W2 with CA employer state ID with my CA wages and they have deducted CA tax. In this case, should I pay CA tax for CA income in the CA w2 or should I get full refund of CA tax and pay MI tax for both MI and CA income from both W2s. Appreciate your clarification.

LenaH

Alumni - Expert

If a California nonresident receives W-2 wages for work performed out of state, even if it's from a California employer, the income is not subject to California income taxes. Therefore, you would file a nonresident California return with zero sourced wages to get a refund of taxes paid to California. You are responsible to pay your resident state of Michigan for all of your income.

@sivam25

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