turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

swade7422
New Member

I have sole proprietorship in AZ In 2017, I received 1099 income from CA and AZ companies. I only filed AZ tax return. CA wants CA tax return. Is this true?

 
x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

1 Best answer

Accepted Solutions

I have sole proprietorship in AZ In 2017, I received 1099 income from CA and AZ companies. I only filed AZ tax return. CA wants CA tax return. Is this true?

Your resident state will tax you on ALL income earned.  Since the Supreme Court has ruled that states can't tax you twice on the same income, states provide for a credit for taxes paid in other states.

Some states have reciprocal agreements with other states which makes life easier.  This is generally in the context of an employee receiving a W-2 where you would complete a form and the payroll provider would only withhold state taxes for the resident state.

While AZ and CA have reciprocity between them, it does not help you since you are self employed. 

As noted above, states provide for a credit for taxes paid in other states.  This credit is generally taken on your resident state tax return.  However, to make life a little more complicated, some states are "Reverse Credit States" where the credit is taken on the nonresident state tax return (not on your resident state tax return).

So in your case, as you can see on the attached AZ instructions, this appears to be the case with Calif.  See the shaded box in the bottom right hand corner of page 1.

https://azdor.gov/forms/tax-credits-forms/credit-taxes-paid-another-state-or-country

What you will do is complete your AZ return as you typically do.  Then complete a Calif nonresident tax return and report the Calif income.  You will then claim the credit for taxes paid on this income on the Calif return.  I have not looked up the tax rates for each state, but your tax should be minimal at best; this is because I am assuming that the Calif tax rate is higher than the AZ tax rate (only an assumption on my part).

*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.

View solution in original post

8 Replies

I have sole proprietorship in AZ In 2017, I received 1099 income from CA and AZ companies. I only filed AZ tax return. CA wants CA tax return. Is this true?

Did you perform work IN California? Or did you just get paid by a company that is located in California?
♪♫•*¨*•.¸¸♥Lisa♥ ¸¸.•*¨*•♫♪
swade7422
New Member

I have sole proprietorship in AZ In 2017, I received 1099 income from CA and AZ companies. I only filed AZ tax return. CA wants CA tax return. Is this true?

For each job less than 20% of my work was performed in CA.  I also paid subcontractors who completed parts of the jobs in CA.  Some of jobs were AZ companies and 100% of that work was performed in AZ.  

I have sole proprietorship in AZ In 2017, I received 1099 income from CA and AZ companies. I only filed AZ tax return. CA wants CA tax return. Is this true?

If you performed work IN California, California will have their hand out and want you to file a CA Non resident return and pay CA state taxes on that income you earned in CA.
♪♫•*¨*•.¸¸♥Lisa♥ ¸¸.•*¨*•♫♪

I have sole proprietorship in AZ In 2017, I received 1099 income from CA and AZ companies. I only filed AZ tax return. CA wants CA tax return. Is this true?

I'll be honest, Ive never prepared a return for someone that is self employed in more than one state, Im not sure how to go about splitting these income/expenses out per state.
♪♫•*¨*•.¸¸♥Lisa♥ ¸¸.•*¨*•♫♪
swade7422
New Member

I have sole proprietorship in AZ In 2017, I received 1099 income from CA and AZ companies. I only filed AZ tax return. CA wants CA tax return. Is this true?

Will it only be the % of each job that was actually competed IN California?

I have sole proprietorship in AZ In 2017, I received 1099 income from CA and AZ companies. I only filed AZ tax return. CA wants CA tax return. Is this true?

That's what I would guess...what kind of work are you doing that it straddles states like that?
♪♫•*¨*•.¸¸♥Lisa♥ ¸¸.•*¨*•♫♪
swade7422
New Member

I have sole proprietorship in AZ In 2017, I received 1099 income from CA and AZ companies. I only filed AZ tax return. CA wants CA tax return. Is this true?

Well...thanks for getting me started dealing with this!

I have sole proprietorship in AZ In 2017, I received 1099 income from CA and AZ companies. I only filed AZ tax return. CA wants CA tax return. Is this true?

Your resident state will tax you on ALL income earned.  Since the Supreme Court has ruled that states can't tax you twice on the same income, states provide for a credit for taxes paid in other states.

Some states have reciprocal agreements with other states which makes life easier.  This is generally in the context of an employee receiving a W-2 where you would complete a form and the payroll provider would only withhold state taxes for the resident state.

While AZ and CA have reciprocity between them, it does not help you since you are self employed. 

As noted above, states provide for a credit for taxes paid in other states.  This credit is generally taken on your resident state tax return.  However, to make life a little more complicated, some states are "Reverse Credit States" where the credit is taken on the nonresident state tax return (not on your resident state tax return).

So in your case, as you can see on the attached AZ instructions, this appears to be the case with Calif.  See the shaded box in the bottom right hand corner of page 1.

https://azdor.gov/forms/tax-credits-forms/credit-taxes-paid-another-state-or-country

What you will do is complete your AZ return as you typically do.  Then complete a Calif nonresident tax return and report the Calif income.  You will then claim the credit for taxes paid on this income on the Calif return.  I have not looked up the tax rates for each state, but your tax should be minimal at best; this is because I am assuming that the Calif tax rate is higher than the AZ tax rate (only an assumption on my part).

*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question