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Level 2

Solved

CA nonresident and remote work

Forum|Forum|4 years ago
March 2, 2022
3 replies
2 views

I worked remotely as a 1099 in CA for 6 months from my home in Nevada. I never set foot in CA. The company I worked for withheld $13,044. I was assured by them that I would get that all back. My withholding was reported on a CA Form 592-B. Now that my taxes are complete my CA refund is only $3541. To the best of my knowledge I've made no mistakes and noted where asked that I was in NV the entire year. Why am I not getting all my withholding back? Thanks in advance for the help.

Best answer by Hal_Al

You were misinformed. California will tax that income.

If all your work is actually (physically) performed in your state of residency and you never physically work in any other state, then you would have NO "other state income. "Currently, the only exception to that is California. Due to a 2019 court ruling in CA, if you are a sole proprietor and you provide services to a client located in CA, that income is taxable by CA - even if you never set foot in California.

Hal_Al

Answer

Level 15

You were misinformed. California will tax that income.

basperoAuthor

Level 2

Thanks.

Certainly no surprise there.

MayaD

Alumni - Intuit

The issue not where you performed the services, but in what state the benefit was received.

Even if you never set foot in California, as an independent contractors, if you are performing services for a California-based customer, you have an economic nexus with the state and you are likely doing business in California for income tax purposes.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

McCartF

Level 2

What is you are a W-2 employee who works remotely in another state(MA) for a CA corporation. The corporation insists that because my boss is located in SF and my original contract stated that my home base was SF, that they must withhold CA taxes even though I do not intend to return to CA and have made all the changes to consider myself a MA resident (car registration changed, voter registration changed, signed a long term apt lease, doctors and dentists now located in MA etc). Can i

ever establish MA residency while working for this CA company?

TomD8

Alumni - Champ

@McCartF --

"Can i ever establish MA residency while working for this CA company?"

Of course you can. People move from one state to another every day.

If you abandon your domicile in CA and establish it in MA, then for tax purposes you become a non-resident of CA and a resident of MA. See Change of Domicile on page 10 of this CA tax publication:

https://www.ftb.ca.gov/forms/2021/2021-1031-publication.pdf

CA taxes non-resident W-2 employees only on CA-source income. W-2 income is sourced where the work is actually (physically) performed. The W-2 income of a CA non-resident who never physically works in CA is not subject to CA income tax.

Your state tax obligations are determined by where you live and work, not by the location of your employer.

Therefore, if you become domiciled in MA and you perform your work only in MA, your employer should withhold MA income tax, not CA income tax. If your employer will not withhold MA income tax for you, you'll have to make quarterly estimated tax payments to MA.

Finally, California law does not require employers to withhold taxes for non-residents who perform no services within California. See FAQ #15 in this CA tax reference:

https://www.ftb.ca.gov/forms/misc/1017.html#1017-12

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

Opus 17

Level 15

One thing to be aware of is that California has very different rules for W-2 employees and independent contractors. If you are a California non-resident employed as a W-2 employee, you only pay CA tax for periods of time you physically work or live in California.

However, if you are an independent contractor (1099), you are required to pay California income tax for any income you earn from clients located in California, even if you never set foot in California yourself.

soozau

Level 2

I now live in WA and have been using Turbo Tax for many years. For 22,23 and 24, I worked for two CA employers. I am a W2 employee for one of them and a 1099 contractor for the other. Is TurboTax smart enough to not have reported my W2 income on my CA tax returns for those years? Or do I need to amend my CA taxes for those years and hopefully get a refund?

Opus 17

Level 15

@soozau wrote:

I now live in WA and have been using Turbo Tax for many years. For 22,23 and 24, I worked for two CA employers. I am a W2 employee for one of them and a 1099 contractor for the other. Is TurboTax smart enough to not have reported my W2 income on my CA tax returns for those years? Or do I need to amend my CA taxes for those years and hopefully get a refund?

You need to check your own returns. Download or print the PDF of your return, does it include a CA state income tax return, and what is reported?

If you are a W-2 employee in Washington state for a California-based employer, your wages are not taxable in California. Turbotax would only create a CA state return if you told it to, or if you had California tax withholding in box 16 and 17 of your W-2. If you did have CA withholding, you would have filed a CA non-resident return to report no state wages, no state tax owed, and claim a refund of the withholding. (And you should contact your employers to stop any CA withholding.)

If you are self-employed, California taxes your income if your client(s) are located in California, regardless of where you lived or physically performed the work. This is something you would have to declare yourself, and you would have to manually allocate your self-employment income to California (all or part, depending on the facts.)