California sourced income
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Level 2

California sourced income

Been trying to keep up with the new issues re: California sourced income for those of us who don't live there but apparently have to pay taxes to that state. (The Blair Bindley case is horrifying to me.) Most of the advice I got last summer on here said I didn't owe, but it sure seems that has changed. (And I'm still waiting on my August 2019 response to FTB to find out what they think.)  


My year they wrote to me about I had a larger 1099 for a writing job for an individual person who happened to live there. And I'm sure they'll eventually send me some kind of bill even though I already paid taxes to my home state for that tax year on the same income. 


But most years, I have very small 1099s from CA from 2 sources. Both of them are less than $600 but unfortunately, both entities still send that 1099 to me even though it's not required. One is a writing agent who is more of a pass through source of money because they take their 15% commission from my book royalties and then send me the rest. But the publisher I worked for that's actually paying those royalties was in another state. So even though my 1099 is by a CA company, they aren't even really the source of the money. They just want their cut first, and send me the rest.


Secondly, same with the WGA (writer's union). They collect money on my behalf for projects that aired in foreign countries, but they do so for companies I also worked for from other states and not CA. But FTB would never know that b/c my 1099 from WGA shows they have a  CA address. 


So my fear is... because of those two 1099s I get every single year, am I forever bound to filing CA? It costs me at least $75 to do that and those 2 checks, some years aren't that much higher than that to pay for that headache.


I doubt there's a way for the FTB to understand 1099s are not really CA money without an appeal.   I don't think I can appeal the year they asked about based on all the comments here, even though it ticks me off. 🙂 Ironically, the years I did live in CA they were more than happy to take all the state income tax from all jobs I did for clients in other states.  Are we heading to a place where all of us will have to file 8-10 state tax returns just b/c we work remotely from one? Who's to stop other states who are tired of CA taking their tax dollars from then in turn trying to collect from everyone else who works for companies in their own state and live in CA or elsewhere? Sorry... just venting. As a TT user, doing a bunch of state tax returns is NOT cheap. And neither is paying an accountant to fill out extra ones. 


Will Turbo Tax be updating their software fully for CA to make it a lot easier for us to answer questions correctly?  It seems a lot of us on here have suddenly found ourselves in this boat. 


I'm also curious why when I work for out of my home teaching online classes, state universities who pay by W2, always change my work state from the state of the University to my home state of GA. They even have a state ID to pay through.  If this is "correct" (and one I teach for is from CA) ... why is the rule different for 1099ers?  Or has CA just not woken up to that yet and will come after us next for that W2 money? 


Lastly how can they tell profit on a specific portion of my 1099 that is on one schedule C from a CA client, that mixes all work I do for the rest of my clients that aren't from CA? Like, there's no way from the 1099 they wrote me a letter about it's 100% profit. I write off all office expenses and have a home office that's designated and other work related expenses. How would they know which portion of the money is actually profit when it's mixed in with many other 1099 jobs? 


I wish CA would establish a minimum of CA source income that trips a return. Instead the rules seem set up to make you file based on total income of you (and your spouse if that applies) from all sources. So on years I have about $600 in CA 1099 income, it looks like I can't get out of filing for such a ridiculous amount of income .  Seems like a hardship caused for a lot of people. But it's CA and you can't fight them.... 


And by the way...when I lived there, you needed a business license. That office will probably come after all of us next. (And they charge separate business taxes based on profit.) 






2 Replies
Level 2

California sourced income

I have one other question in case someone already knows how...


In TT2017... where would it ask the question about one piece of income to choose CA sourced? I'm trying to run a version of my taxes that will show me what they think I owe based on that answer. As currently filled out, TT says I owe nothing but I already know that's not true.  But I don't know where to tell the s/w that one 1099 is CA Sourced. Has anyone been able to get the software to do the right calculation for you?  (In my research it says to use Schedule R, for allocations but I don't see anywhere in TT2017 CA return that has that form.) 



Expert Alumni

California sourced income

Yes, you need to use Schedule R for California to allocate the income that belongs to California.

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