My husband received late payment early 2017 for work done in AZ in 2016, after we had moved to CA the end of 2016. Should this 1099 MISC be reported on AZ return or CA?

[jwilliams0525]

The work was done in AZ but it was freelance work and the 2017 payment was made a while after we moved to CA. When I entered the 1099 MISC info to amend our return it changed the CA refund.

[DanielV01 · Accepted solution]

It depends.  It is Arizona income from the standpoint that it was earned working in that state.  If you were also living in Arizona at the time it was earned, then it is claimed exclusively to Arizona.  However, if you had already moved to California, and came back to finish a job in Arizona, then it is Arizona nonresident income and California resident income.  

Based on your question, it will be easier to claim that income as Arizona nonresident income.  While California taxes the income also, they will give you a credit for the tax you must pay to Arizona on that income.  Otherwise, you would have to file part-year returns to California and Arizona, which could be a little more complicated to do.  (And CA might still ask to tax it).

[jwilliams0525]

The work had all been finished before moving to CA. They just did not pay him enough on his final check and it was too late to pay him what was missing in 2016 so we did not get it until 2017. Does that change anything?

[DanielV01]

Not really.  Speaking from a technical standpoint, it is "Arizona sourced income" because that's where it was earned.  However, because you received it in 2017 when you were a resident of CA, CA taxes the income as well.  It is possible based on the facts to file part-year returns to both states, but that admittedly gets a little complicated with the situation.  Claiming it as Arizona NR income is much easier and probably gets the same result.