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RedHill
Level 1

Moved from CA to AZ to Telecommute. Established AZ residency. How do state taxes owed to CA vs owed to AZ break down?

Moved from CA to AZ to Telecommute. Established AZ residency. Retaining salaried position with CA company. Employer does not have a business unit or office in AZ. Potential business trips back to CA would not total exceed more than 10 business days/year—possibly none. How do state taxes owed to CA vs owed to AZ break down?

 

I have heard on one hand pay AZ then apply credit to CA. Does this mean I would pay net more (double tax) or less, assuming AZ state taxes are lower than CA? On the other hand I have heard  that only AZ taxes are due. Business trips i.e., “duty days” may apply I would assume if any trips back to the CA office are made. Employer just had me update my address in ADP. Is there a need or benefit to update my contract?

 

 

 

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Accepted Solutions
TomD8
Level 15

Moved from CA to AZ to Telecommute. Established AZ residency. How do state taxes owed to CA vs owed to AZ break down?

If you've abandoned your home in CA and established your new main, permanent home (your domicile in tax terminology) in AZ, then for 2020 you will file as a part-year resident in each of the two states.

 

Once you become a resident of AZ, AZ can tax all your income from that point on, regardless of where you earn it.  CA can only tax non-residents on income from work actually (physically) performed inside CA ("CA-source income").  CA cannot tax a non-resident on work performed outside CA.  (There is an exception if you are paid as an independent contractor rather than as a W-2 employee.)

 

You become a resident of AZ for tax purposes when you begin living in your new domicile in AZ.

 

If you have CA-source income after becoming an AZ resident, that income will be taxable by both states.  But you'll be able to take a credit on your CA return for the taxes paid to AZ on the income taxed by both.

 

You should ask your employer to withhold AZ taxes from your pay.  That's because all of your income after the move will be taxable by AZ.  If your employer cannot withhold AZ taxes for you, you may want to begin making quarterly estimated tax payments to AZ.

 

**Answers are correct to the best of my ability but do not constitute tax or legal advice.**

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1 Reply
TomD8
Level 15

Moved from CA to AZ to Telecommute. Established AZ residency. How do state taxes owed to CA vs owed to AZ break down?

If you've abandoned your home in CA and established your new main, permanent home (your domicile in tax terminology) in AZ, then for 2020 you will file as a part-year resident in each of the two states.

 

Once you become a resident of AZ, AZ can tax all your income from that point on, regardless of where you earn it.  CA can only tax non-residents on income from work actually (physically) performed inside CA ("CA-source income").  CA cannot tax a non-resident on work performed outside CA.  (There is an exception if you are paid as an independent contractor rather than as a W-2 employee.)

 

You become a resident of AZ for tax purposes when you begin living in your new domicile in AZ.

 

If you have CA-source income after becoming an AZ resident, that income will be taxable by both states.  But you'll be able to take a credit on your CA return for the taxes paid to AZ on the income taxed by both.

 

You should ask your employer to withhold AZ taxes from your pay.  That's because all of your income after the move will be taxable by AZ.  If your employer cannot withhold AZ taxes for you, you may want to begin making quarterly estimated tax payments to AZ.

 

**Answers are correct to the best of my ability but do not constitute tax or legal advice.**

View solution in original post

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