Double taxation in Ohio and CA

[zinsat]

I joined the employer (a global consultancy) I work for currently in early December 2018, and received the sign-on bonus in the same month. My resident state is Ohio and I was then slated to work in Palo Alto, CA for which my payroll was set such that both CA taxes along with those in Ohio are being deducted from my paycheck. However, I have been working remotely from Ohio from the time I joined the company. Having never set foot in CA this entire time, is there a way I can get my taxes reimbursed from the state of CA including those deducted from my bonus paid in December 2018. I should mention that I have not filled out non-resident tax forms in CA when I submitted my tax return to IRS this year. If I need to fill it to keep myself from doubly taxed, can I fill it in my next tax return?

[Anonymous · Accepted solution]

Although certain states have varying non-resident tax laws, generally, if you live in one state and work in another remotely (so you don’t physically travel to another state for work), then you would only file and pay taxes to your resident state.

That means, if you’re working remotely you’ll only have to file a resident tax return to the state you live in.

However, if your W-2 form (that form you receive at the end of the year or beginning of January) lists a state other than your resident state, then you’ll need to also file a non-resident tax return to the state listed. In other words, you’ll file two state tax returns; a resident return to the state you live in and a non-resident return to the state listed on your W-2 (the state your company is located in).

Report all earnings on your OH return

If you’re working remotely from your  Ohio home for a company in California and receive a W-2 form with two states listed, both OH & CA, then you’ll also need to file a CA non-resident tax return. On this non-resident return, you’ll report only the information (wages listed as CA) listed on that W-2 form.

note that if you have state wages for CA on the W-2 OH will grant you some form of credit for the wages taxed in both states.

[zinsat]

Thank you for your reply. Does this mean I have to re-file my tax return? Will there be some sort of penalty to be expected in such a case?

[Anonymous]

I would also add that if  you never worked in CA but the company reported CA wages on the W-2, I would ask it to cite what Ca law would make such wages taxable there.  

if Ca wages were on the W-2 and the company won't correct,  (this assumes that they can not cite any law which would make some of your wages taxable there) your only recourse is to file a CA return as stated above (sooner or later you will get a notice for non-filing)   and then see a lawyer.  but ask yourself, do you value your job and how would you feel if suddenly you had to find a new one?    

[TomD8 · Accepted solution]

CA can only tax a non-resident of CA on CA-source income.  Income is "sourced" where the work is actually (physically) performed.   If you never physically worked in CA, you have no CA-source income, and therefore you owe no taxes to CA.  Of course, ALL your income is taxable by your resident state of Ohio, regardless of where it was earned.

Submit a CA non-resident return, showing zero CA income, in order to receive a refund of the incorrectly withheld CA taxes.

If Boxes 15-17 of your W2 show CA amounts, I would suggest printing and mailing the CA return, rather than e-filing it.  I would also attach a note explaining that you never actually worked in CA, and that that is why you are reporting zero CA wages.

Finally, ask your payroll department to cease withholding CA taxes - if you haven't done so already.

Addendum:  You would NOT seek a credit on your OH return for taxes paid to CA, because in fact you owe no tax to CA.