Moving from CA to WA and working remotely - tax implications

[TomD8]

@Expat_CPA --

The problem is that your original W-2 probably IS correct, in that it shows the amount your employer actually did withhold and has already sent to the state.  So I wouldn't use form 4852.

In your situation I would enter the original W-2 as is, then file a part-year resident return for each of the two states, and allocate your income accordingly.  CA will refund any excess amount withheld, and you will have to pay AZ any tax due.

There will be a discrepancy between the state income amounts shown on your W-2 and on your state returns, which you can explain if you are questioned.

I can tell you that it is not at all uncommon for employers to be late to change state withholding when an employee changes residence to another state.

[Expat_CPA]

@TomD8 

That seems reasonable, and I'm definitely okay with submitting fewer forms, it just did not occur to me that the original W2 would be correct.

To be clear the original W2 says something like:

CA State wages (10,000) State income tax (1,000)

When I think it should more appropriately say something like:

CA State wages (9,000) State income tax (1,000)

AZ State wages (1,000) State income tax (0)

But the top example nonetheless should be acceptable without a 4852?

Do you think I should attach a letter with my return ahead of time to preempt any sort of questions?

Thanks a lot!

[TomD8]

@Expat_CPA --

"Do you think I should attach a letter with my return ahead of time to preempt any sort of questions?"

Personally, I think printing your state returns and mailing them in with a note explaining the discrepancy with your W-2 would be a good idea.

[tax_bak]

I got an opportunity to work in WA , moving from CA . If I move alone and have my driver license and address all moved to WA, while my kid and wife continue to be in CA (cause she works for an employer here ) . My plan is to travel here every week for couple to 3 days to CA. when it comes to taxes what will be my status , will I be considered still CA resident and I have to pay taxes here in CA or given I have a permanent address and driving license from WA - am I considered Washington resident and don't need to pay state taxes for rest of the year ? Will there be any implications for wife's taxes , cause she is here in CA. We have been filing jointly so far - does this mean we have to file separately going forward?

[Expat_CPA]

@tax_bak 

This doesn't constitute any tax or legal advice but my impression after doing research previously is that CA is pretty aggressive and does not let you abandon it as a domicile very easily.

It will depend on a lot of factors, and the fact that the rest of your family is in CA and you return frequently there would probably be used against you by the FTB.

Other factors to be weighed are: do you own real estate in CA? Do you have local bank or credit union accounts in CA? Are most of your other family in CA? Are you still registered to vote in California? Do you have the appearance that you would intend to return to CA if you leave your job in WA?

This sounds like it's a complicated arrangement due to the fact that the rest of your family is still in CA, so you might to talk with a tax attorney in CA regarding what the proper classification for you would be or what your options are.

The safest option for you would be to sever virtually all ties to CA but that doesn't seem to be an option unless your wife finds work in WA.

[tax_bak]

Thank you for that response. So if we move completely to WA, are there any other implications , if I still own Real estate in CA? meaning I have no other income other than the rental from CA -- will I be paying taxes only on that or any other thing. My initial Idea was everything for myself would be WA but everything else for my wife would be CA thats how I was thinking , but yes I get the angle that CA FTB might still come after me .. 

[TomD8]

@tax_bak 

If you and your wife change your domicile from CA to WA, then you become non-residents of CA.  See page 8 of the web reference below for information about what a change of domicile entails.  Once you become a non-resident of CA, you can only be taxed by CA on CA-source income.  CA-source income is explained on pages 6-9 of the same reference.

https://www.ftb.ca.gov/forms/2020/2020-1031-publication.pdf

If you change your domicile during the tax year, you must file a part-year resident CA tax return for that year.  In subsequent years,  you would file a non-resident CA tax return to report your CA-source income.

Note that rental income from property located in CA is considered CA-source income.

[Bksevers]

Hi, I am going to live in Washington for 3 months.  I am a permanent resident of California.  Do I need to change my address with my employer for tax purposes since Washington doesn't have state taxes?  I work remotely, so my employer said they don't care either way, it is more about tax laws.  I would rather not change my address if it is not needed.  Please let me know.  Thank you.

[TomD8]

@Bksevers --

If your domicile (your main, permanent home) is in California, you remain a resident of California for tax purposes during temporary absences, and ALL your income remains taxable by California - regardless of where you earn it.

So if you're only going to be away for 3 months, there is no need to change your address for tax purposes.  Your employer should continue to withhold California taxes.

[Really-not-smart]

Can you give an update on how you chose to file your taxes and the result was? In a similar boat and want to know the actual response from FTB for doing this.

[mamabear80]

I filed them based on the state we had domicile in per CA FTB 1031 publication (https://www.ftb.ca.gov/forms/2020/2020-1031-publication.pdf).