I received a notice that I didnt file california tax in 2020, but I was living and working remotely in WA state during 2020 but my employer is in California. Do I need to pay it or can I file a 540NR for 2020?
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Hi @sijiaz !
California requires you to file form 540NR for California sourced income if you meet the thresholds as listed here:
Hope this helps!
Cindy
If you were a non-resident of CA for all of 2020, and you were a W-2 employee, and you never physically worked within the state of California the entire year, then your income for that year is not taxable by CA.
CA taxes non-residents only on CA-source income. W-2 income is "sourced" where the work is actually (physically) performed. If you worked solely from a WA location, then your income from that work is Washington-sourced, not California-sourced. If this is the case, you should reply to the notice by explaining that in 2020 you were a non-resident of CA, and that you never worked within the state of CA in that year.
From CA FTB Publication 1031, page 6:
"Wages and salaries have a source where the services
are performed. Neither the location of the employer,
where the payment is issued, nor your location when
you receive payment affect the source of this income."
https://www.ftb.ca.gov/forms/2022/2022-1031-publication.pdf
Let's go back. Where was your domicile? Your domicile is your permanent residence. You can only have one domicile at a time, no matter how many homes you might own or how much traveling you do. There is no single factor that controls, but some key factors are where do you live, where are your significant family and social relationships (church, bowling league, clubs), where are your doctor and dentist, where are you registered to drive and vote, and so on.
It is possible to be away from your domicile for a long time, even years, without changing your domicile, and your intention to return or to change domiciles permanently matters. To change your domicile, you must not only take steps to set up a new domicile, but also take active steps to abandon the prior domicile.
If you were a California resident in 2019 and 2021, then you were probably domiciled in California in 2020, even if you worked remotely all year. You would owe a California income tax return to report and pay tax on all your world-wide income, no matter where you were physically living at the time.
If you were not domiciled in California, then you only owe a non-resident return to report California-sourced income. For a W-2 employee, CA-source income is income earned while you are physically living or working in CA. CA-source income does not include income from a CA-based employer as long as you were living and working out of state. For example, if you worked 1 day a month in CA, because you had required meetings or training, then about 1/20th or 5% of your income would be CA-source, but the rest is not.
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