California & Rhode Island state tax return complications - MFJ

[prakashnaga88]

Hello everyone, posting this in case someone knowledgeable could help us out.

This is our situation:

• We got married in the summer of 2023 and have filed a Federal return as Married Filing Jointly (MFJ)

• I worked all year with a single employer in California (CA) and have a W2 for it.

• My wife worked in Rhode Island (RI) for 5 months (less than 183 days which is the threshold to be considered a resident) and has a W2 for it.

• She moved right after and worked the remainder of the year in CA in a different job and has a W2 for it.

Here are my questions,

• When filing jointly for CA, we noticed CalFile is defaulting to AGI (line 11 in Form 1040) but this includes income earned in Rhode Island as well (wife's first W2). My question is how do we earn credit for it? Or get an alternative taxable income that is an accurate representation of income earned in CA only?

• For Rhode Island tax return, as she is the only one that has earned an income, what should be her filing status? Should we file MFJ or should she just file Married Filing Separately (MFS) just for that W2? In the event MFJ applies here as well, how do we earn back the credit as we would be looking at paying substantial amount of taxes here?

Thanks in advance!

[DMarkM1]

You will file a CA part-year joint return and a part-year separate RI return with only your spouse's income/deductions for her time in RI.  Yes, CA does use the total federal AGI to arrive at a total CA AGI.  However, the CA part-year return will allow you to allocate the RI income out of CA.  The allocated CA only income (RI not included) is then divided by the total CA AGI to arrive at a proportion of income that is CA sourced.  That proportion is multiplied by the CA tax as if resident all year to arrive at the portion of tax that is CA only.  You can use your federal joint return to complete the CA joint return for e-filing as normal. 

Your spouse will need to sign up for a separate TurboTax account. She will create a "Mock" federal married filing separate return indicating she lived in CA on 31 Dec but also lived in another state, RI, during the tax year.  This will generate a part-year RI return and a part-year CA return which will not be completed/filed (filing CA jointly).  Enter all her income and deductions as normal in the federal interview.  Next, work the RI interview and allocate only the RI source income to RI.  She will need to print/mail the RI return since the "Mock" federal separate return will not be filed; you already filed jointly.  

Here is a RI reference indicating the separate return is allowed.