CA taxes for independent contractor from WI

[Jen991]

Hi!  I do financial consulting for a CA company, but live in WI.  I will receive a 1099 from the CA company, but have never been in CA.  Do I still need to file a CA return and a WI return?  If I have to file both will either state give me a credit for taxes paid?  If I have to file in CA I assume only my schedule C income related to CA is taxable - do I need to separate all my expenses between this CA 1099 and other 1099 income?

[Anonymous_]

@Mike9241 

[TomD8]

CA taxes non-resident independent contractors on income earned from services provided to CA-based clients.  So you'll have to file a non-resident CA tax return (CA Form 540NR) in addition to your home state WI tax return.  You'll be able to attach Schedule CA (540NR) to the CA tax return in order to separate out your CA business income and expenses.

ALL your income regardless of where earned is taxable by your home state of WI.  You'll be able to claim a credit on your WI return for the taxes paid to CA on the income taxed by both states, so you won't be double-taxed.

[Jen991]

Thank you so much @TomD8 !! This is extremely helpful!

[Jen991]

So a follow up question. I see on the 1099 NEC that box 6 (State/Payers state no.) says WI, but it is a company in CA (payor name), but they do have a remote office in WI.  Is that why they say WI in box 6 - would that still require me to file the CA return - just curious.

[TomD8 · Accepted solution]

Excellent question.  The court decision underlying all this (the "Bindley" decision) states that the independent contractor's income is "sourced" to the place where the benefit is received.   If that place is California, the income is taxable by California.   They will first look to the contract you have with the payor in order to determine this (if you have one).  

[Jen991]

Thank you so much!  I had did limited research and could not find much.  Unfortunately it was the CA office.  I really appreciate your quick response!!  Have a wonderful night!