Hi, I'm currently working for CA based company but am living in IL. I plan to relocate to CA later in the year. Currently my paycheck takes out a portion of my salary to pay CA income taxes, although I am not based in CA.
However, the DE-4 form is confusing as there's no option to exempt from withholding except 2 options:
- I am exempt from California withholding because I did not owe any federal/state income tax last year, AND I do not expect to owe any federal/state income tax this year. This exemption is good for one year.
- I certify under penalty of perjury that I am not subject to California withholding. I meet the conditions set forth under the Service Member Civil Relief Act, as amended by the Military Spouses Residency Relief Act and the Veterans Benefits and Transition Act of 2018.
In my case, should I select the first option to exempt from withholding?
Are you in the military? The withholding exemption you quoted is for active duty military.
If you are NOT military, then as long as you're an Illinois resident, ALL your income will be taxable by Illinois, regardless of your employer's location. If you're a W-2 employee, the income you earn from work carried out in Illinois will NOT be taxable by California.
As soon as you become a California resident, ALL your income will become taxable by California. You will become a California resident on the day you begin living there with the intent of making it your new main home.
You should plan your tax withholdings accordingly.
So does this not apply in my scenario?
" I am exempt from California withholding because I did not owe any federal/state income tax last year, AND I do not expect to owe any federal/state income tax this year. This exemption is good for one year."
I'm not sure why currently ADP is making me pay CA tax although my address is IL. I was wondering if I should choose the option above in my DE-4 to fix that.
Your employer should not be withholding any California tax from your pay if you never lived or worked in CA in 2023, so yes, you could choose option 1.
However, you say you are moving to CA in 2024, so you may need to file a new form when you move to start CA withholding again (or just let them keep withholding it) as you will be a California Part-Year Resident for 2024 and will owe CA tax on your wages.
For 2023, file a Non-Resident State Return to CA, declaring California income of $0 to get your withholding refunded.
Here's more info on California DE-4.
Thank you! Would it be possible to make amendments to the DE-4 in the middle of the year since I will be relocating to CA around July? So I check the first box for now, but revert that once I relocate and start paying taxes to CA?
That would be up to your employer and the payroll they use.
If they don't start to properly withhold California Tax when you move there, you could make Estimated Tax Payments to the state.