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tdquast
New Member

Question about whether or not we have to file a non-resident return for CA

Live in MN and work here as well as an insurance agent.  Have a non-resident license in CA and write policies there as well.  I am an independent contractor for the company in CA and they pay me monthly, but I don't have an office there.  Do I need to file a non-resident return with CA?
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Accepted Solutions
GeoffreyG
New Member

Question about whether or not we have to file a non-resident return for CA

Although you may live in Minnesota (and thus have to file a full-year resident Minnesota state income tax return), the act of selling insurance policies to California residents, in this manner and across interstate lines, provides the state of California sufficient "nexus" (a tax law concept) to tax you on your California policy sales commissions to California residents.

Hence, you should file a nonresident California state tax return if your California-source income (i.e., the commissions you receive from the insurance policies sold to California residents) exceeds the filing threshold, based on your income and household size.  You can compare your income and household size to the chart and instructions for nonresidents found at the following California Franchise Tax Board website:

https://www.ftb.ca.gov/individuals/fileRtn/


If you are above the filing threshold, then you should file a tax return in California; if you are below the threshold, then you legally do not have to file.

To the extent that you are subject to paying state-level income taxes on the same California-source income by both states (as Minnesota will tax you on all of your income, earned everywhere, since you are a state resident), you will have double-taxed income, or what is alternatively called mutually-taxed income.  In order to alleviate that occurrence, you would be allowed a state tax credit for taxes paid to another state, which would either be for the whole amount of the extra tax, or at least a significant portion of it.

You can learn more about multi-state tax issues, and the mechanical details of filing more than one state in TurboTax, at the following webpages:

https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/Multiple-States---Figurin...

https://ttlc.intuit.com/questions/1901271-how-do-i-file-a-nonresident-state-return


Thank you for asking this important question.

View solution in original post

1 Reply
GeoffreyG
New Member

Question about whether or not we have to file a non-resident return for CA

Although you may live in Minnesota (and thus have to file a full-year resident Minnesota state income tax return), the act of selling insurance policies to California residents, in this manner and across interstate lines, provides the state of California sufficient "nexus" (a tax law concept) to tax you on your California policy sales commissions to California residents.

Hence, you should file a nonresident California state tax return if your California-source income (i.e., the commissions you receive from the insurance policies sold to California residents) exceeds the filing threshold, based on your income and household size.  You can compare your income and household size to the chart and instructions for nonresidents found at the following California Franchise Tax Board website:

https://www.ftb.ca.gov/individuals/fileRtn/


If you are above the filing threshold, then you should file a tax return in California; if you are below the threshold, then you legally do not have to file.

To the extent that you are subject to paying state-level income taxes on the same California-source income by both states (as Minnesota will tax you on all of your income, earned everywhere, since you are a state resident), you will have double-taxed income, or what is alternatively called mutually-taxed income.  In order to alleviate that occurrence, you would be allowed a state tax credit for taxes paid to another state, which would either be for the whole amount of the extra tax, or at least a significant portion of it.

You can learn more about multi-state tax issues, and the mechanical details of filing more than one state in TurboTax, at the following webpages:

https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/Multiple-States---Figurin...

https://ttlc.intuit.com/questions/1901271-how-do-i-file-a-nonresident-state-return


Thank you for asking this important question.

View solution in original post

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