I lived in CA for 7mo and NY for 5mo. I will receive a year end bonus (3x base salary) on 12/31 when I am in NY. Should I be paying 7mo CA taxes and 5mo NY on the bonus?

[drverbaitum]

Hello I am desperate for help here! I will be getting a large year end performance bonus on 12/31 (when I will be living in NY) but I lived in CA for 7 months out of the year. I transferred offices internally at my company and fully moved from our CA office to our NY office. Should I allocate the bonus based on time spent throughout the year or pay taxes only to NY on the bonus payment?

[DoninGA]

The bonus received when you are a NY resident is only reported on your NY state tax return.

[drverbaitum]

But why wouldn’t CA try to tax me on the income as well? It was due to my performance during the full year which includes 7 months in CA, wouldn’t that be considered CA sourced income?

[DoninGA]

The bonus is based on your performance with the company.  Since you will be receiving the bonus from the company while a resident of New York, then the payment would only be reported on your New York state tax return.

[TomD8]

The California Residency & Sourcing Technical Manual says this:

Nonresidents
Benefits that are directly related to California employment such as sick leave, bonuses, vacation
pay, and severance pay, are includible as California income. (See Appeal of Edwin O. and Wanda
L. Stevens, 86-SBE-100, May 6, 1986; Appeal of William H. Harmount and Estate of Dorothy E.
Harmount, Deceased, 77-SBE-121, Sept. 28, 1977.)

https://www.ftb.ca.gov/tax-pros/procedures/residency-and-sourcing-technical-manual-disclosure.pdf

Unfortunately, I believe the California FTB may well determine that the bonus must be apportioned according to the number of months worked in each state, on the basis that part of the bonus is "directly related" to California employment.

Since the bonus was actually received as a resident of New York, it is all taxable by New York, but New York will grant an "other state credit" for the tax paid to CA on the portion taxed by both states.  This will prevent double taxation of that income.

[drverbaitum]

Why wouldn’t I just get a CA credit for the portion paid to NY?

The W2 isn’t going to show the bonus as CA income so how can CA allege that a bonus paid after moving is related to CA 

[TomD8]

"Other state" credits are granted by the taxpayer's state of residence. When you receive the bonus, you'll be a New York resident. Thus you would claim the credit on your New York return. I have no idea how California polices its directives. All I can do is acquaint you with their published guidelines.