if I live in AZ but work in CA, it states I owe AZ 500 in taxes this year and get a refund from CA. is this correct
That sounds right. Your nonresident Calif return will partially prepare the "other state tax credit" on Schedule S for your income that is taxed by Calif and Arizona - your 'work' income, basically - be sure you are getting that credit, you probably had to make some entries about that in TT/Calif to help it compute the credit. This helps to mitigate double taxation. Your work income likely hasn't had AZ income taxes withheld so you might owe on that return.
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