My company is based in WA. I moved in WA from my remote work in CA on 01JAN22. My payroll changed address after 4 weeks & deducted CA tax in W2. How to claim CA Tax?

[rakumarji]

I am confused how TurboTax can handle my situation. I really appreciate if you could help reviewing my situation and let me know what I should do?

My timeline:

01/01/2022 - Moved to Seattle(WA) where my company is based from my remote work in CA on 01/01/2022.
 
01/01/2022: Submit my documents and asked my employer to change my address and not to deduct any tax, as in WA no tax.
But payroll took 6 weeks to change my address/profile and they deducted my CA Tax for 6 weeks (per my W2).
Now, W2 shows CA state ncome (box 16) and state tax  withhold  (box 17) for 6 weeks. But technicaly I moved to WA on 01/01/22, and it should be there, but payroll update took time, I understand.

Now, my question is, how to get CA Tax back as technically I should not be paying tax for CA. 
What I tried so far:
1. When I enter, CA Tax Details, TurboTax shows amount earned in CA (amt in box 16) 'income allocation screen' and deduct tax as shown on (amount in box 17 on w2). In my openion I should get this CA tax amount back as it was just delay in payroll deptt to change my address/tax profile. How to do this adjustment? Pls advice.
2> If I ener CA income as 0 on 'income allocation screen' (which is the real case as I practically moved to WA from CA) , then TurboTax return me all tax deducted for CA state.  This is what I want, but it will not match with W2 (box 16  and box17) detail with IRS and may invite AUDIT? 
So, please guide me the correct way to handle this situation and how to do this adjustment? 
Thanks in advance.  

 

[TeresaM]

The IRS will not be monitoring the state withholdings, only the federal, so they will not be involved in the move from California to Washington.

You are correct, there is not individual state income tax in Washington, so you will not need to file a resident return there.

First, please check My Info in the Federal return and be sure the box is checked for Made money in another state and that your address is listed as the correct address in Washington. 

Then, in the California return, be sure it is listed as a Non-Resident return and on the income allocation screen, you will enter California income as 0.  This should prompt the return of the withholding that took place at the beginning of the year. 

[rakumarji · Accepted solution]

Thanks, 

But I have a question:  

When on the income allocation screen, I will enter California income as 0.  This should prompt the return of the withholding that took place at the beginning of the year. This is happening now.

My question is:

#1. Entering California income 0 is correct? ( bacause box 16 on W2 has amount) . It will be a mismatch on box16 and box 17 and may not match W2 information with FTB or IRS and may trigger AUDIT?  Is this CORRECT to enter 0 as California income? Please clarify this and suggest if it may not trigger audit.

#2. OR should I ask my employer to correct W2, which they may not do as payroll update takes 3-4 weeks anyway.

Please suggest if I may proceed with #1 without inviting audit.

Thanks. 

Ravi

[TeresaM · Accepted solution]

State income and withholding will not trigger an audit on the federal return as they focus on the federal portion of the Form W-2.

If you were not in the state of California when you performed the work, then it is not taxable as California sourced income, so you may enter zero on the allocation screen. 

You could ask for a corrected Form W-2 from your employer, but the withholding has already been sent to California, so you will need to file the Non-Resident California state form in any event. It would really not improve anything. The state of California does like to collect money, so they may reply and ask for some documentation of your move but you do not owe any tax to them as someone working in Washington, so there is not really anything for them to audit on a state level. 

People move frequently and all the state tax authorities are accustomed to Part-Year and Non-Resident returns. It is a very normal thing for them. 

[rakumarji · Accepted solution]

HI,

Thank a lot for your quick reply and help on my question. Really appreciate it.

update: my employer says, it take 2-4 weeks to update tax profile in payroll and they will not send a corrected W2. 

So, last question to clarify:

#1: as I explained in #1 above. In TurbTax, I need to enter 'California sourced income' as 0  on allocation screen(even though box 16 on W2 has amount) and I will get my CA tax back. I will enter this as Non-Resident California state return.  Pls clarify this.

#2: The 'California sourced income' may not match with W2 detail (box 16) with state/FTB sent by employer., but it may not trigger audit from california/state as I am resident of WA (I have WA address on W2). In case they ask any documentation, I may provide my apartment lease (starting from 01/01/22) etc.

Pls clarify this as well.

Please clarify both of my question #1 and #2.

Thank you so much once again.

Ravi

[DMarkM1 · Accepted solution]

Yes, the CA return will be nonresident with zero income allocated as CA sourced income.  Correct.  Your proof of residence in WA will suffice if there is ever a CA audit on the return.   

[rakumarji]

Thanks you so much for all your help and expert opinions!!! Really appreciate it. I am all set now!!

Thanks,

Ravi