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I recently moved from CA to FL (Oct 2022), I'm self employed. I'm still keeping ca taxes back. At what point would I stop paying into CA taxes?

If it's mid way through 2023, will turbo tax calculate that only a portion of the year is due ca tax?
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4 Replies
TomD8
Level 15

I recently moved from CA to FL (Oct 2022), I'm self employed. I'm still keeping ca taxes back. At what point would I stop paying into CA taxes?

Once you become a Florida resident, you can only be taxed by CA on CA-source income.

 

Some examples of CA source income would be:

- Independent contractor (1099-NEC) services performed for CA-based clients

- rental income from property located in CA

- W-2 income from work actually (physically) performed within CA.

 

If you as a FL resident have no CA-source income, you have no tax obligation to CA. 

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

I recently moved from CA to FL (Oct 2022), I'm self employed. I'm still keeping ca taxes back. At what point would I stop paying into CA taxes?

Thank you, in my case since I moved to FL from CA in October 2022, and I'm required to live in FL for 6 months before I become a resident...

 

Where would I pay state taxes to during that 6 month period?

I work remotely for a company based out of New York.

I recently moved from CA to FL (Oct 2022), I'm self employed. I'm still keeping ca taxes back. At what point would I stop paying into CA taxes?

"I'm required to live in FL for 6 months before I become a resident..."

 

Says who?

 

The concept you need to know is domicile.  Your domicile is your real and permanent home.  It is where you have the most connections; family and friends, residence, car and voter registration, drivers license, school, church, social clubs, doctor, and so on.  There is no single factor that controls, it depends on the totality of your facts and circumstances.  Establishing a new domicile also requires taking active steps to abandon a prior domicile, such as selling your prior home or giving up your lease, moving all your belongings, etc.

 

It is possible for you to be domiciled in California for years from now, if your move to Florida is temporary and you don't abandon your original domicile.  On the other hand, if you have moved permanently to Florida, and you have abandoned your California domicile, then you are a Florida resident now, and there is no 6 month waiting period.  California may aggressively question your move (because they want their money), but if you can prove you changed your permanent residence or domicile, there is no waiting period.

 

If you did not change your domicile then you file as a California resident no matter where you (temporarily) live.  If you did change your domicile, then you stopped being a California resident on the day you changed your domicile.   You would file a "part-year" resident return, in which you allocate your income to California based on the rules above.  California sourced income is:

  • wages paid to you while you were living or working in california
  • independent contractor income paid to you while you were living in California, plus independent contractor income from clients who are located in California even if you are not
  • other California income like lottery prizes, casino winnings, and income from California real estate

 

"I work remotely for a company based out of New York."

 

This is a separate and also complicated issue.  

 

The general rule is that if you are working out of state for your convenience, you owe NY income tax.  You would file an NY non-resident return to report your NY-source income, and in your case, your would file a CA part-year resident to report all your worldwide income while a CA resident, plus any CA-source income after you moved to FL.  CA will give you a credit for out of state taxes you paid to NY, which reduces the effects of double taxation.  

 

If you are working out of state for the employer's convenience, you do not owe NY state income tax.  This might be that the company has no more office space for you, or they want you to be in FL for some business reason of theirs, such as to more easily interact with their FL customers.  It depends on the facts and circumstances of each job.

 

Then there is a special circumstance of the rule that says that if you never work inside NY, even one day, then NY can't tax you even if you are working remotely for your own convenience.  However, if you even work in NY one day a year, such as for training, or a monthly staff meeting that you are required to attend in person, then your job becomes sufficiently connected to NY state that all your remote income is taxable.  (This would apply if you work while residing in NY even temporarily, so if you traveled to NY for a work conference that was held at a hotel instead of the company offices, the rule still applies.)

 

The reason for this exception is that NY can only tax you if your job has a financial connection or nexus to NY.  Just working for an NY based employer is not enough, but if you work for an NY employer even one day inside NY borders, then your job for the whole year is "connected" to NY state. 

TomD8
Level 15

I recently moved from CA to FL (Oct 2022), I'm self employed. I'm still keeping ca taxes back. At what point would I stop paying into CA taxes?

Simply put:

 

You become a FL resident for tax purposes on the day you begin living in FL with the intent (as demonstrated by your actions) of making it your permanent home.  There is no "6-month rule."  From that point on, you have no tax obligation to CA unless you have CA-source income, as I explained in my previous post.

 

If you as a resident of CA or FL never physically work within the state of NY, then you have no tax obligation to the state of NY.  The convenience rule would not apply.

 

FL, of course, has no state income tax.

 

The income you earned prior to your move from CA is of course 100% taxable by CA. 

 

So, for tax year 2022, you will file a CA part-year resident tax return, CA Form 540NR.  And if you never physically worked within NY in 2022, that CA part-year resident return is the only state tax return you'll have to file**.

 

**If you never worked within NY but your employer mistakenly withheld NY taxes, then you will have to file a non-resident NY tax return, allocating zero income to NY, in order to have those taxes refunded.

 

 

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

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