Moved from CA to WA, continuing to telework for CA-based employer

[jwald]

Hi all - I work for a software company that is based in California and my physical office location is still listed by the company as California. That being said, my family and I moved permanently from CA on 6/26/20 and arrived permanently in WA state on 6/27/20, with the intention to continue working remotely. This was not a temporary COVID move and we plan to stay in WA indefinitely. Although my remote work is with the permission with my supervisor, my employment contract does not specifically stipulate that my job is remote.

My employer has record of my change of home address to WA state as of 6/28/20 (even though my physical office location hasn't been changed) and I have a lease document for my new home in WA state as of 7/1/20. I also have a WA state driver's license issued in August. Despite the fact that the company hasn't changed my office location and has continued to withhold CA state taxes all year, I have both resided and performed my work remotely from WA state since 6/27/20. I have not set foot back in CA since that time.

Am I entitled to recover my CA state taxes paid since my move to WA? If so, can I claim them as of 6/27/20 when I arrived in WA, or does it have to be based on the date of issuance of certain forms of documentation?

Thanks for any guidance.

[AmyC]

You have CA sourced income. You pay CA tax on CA income.

CA says:

Part-year residents. Taxpayers must file if total taxable California income (income from all sources while a California resident and California-source income while a nonresident) is more than the amount in chart for filing status.

Filing Status    Age as of December 31              Dependents 0        1         2 or more

Single/HOH         Under age 65 ................          $14,797          $27,564     $37,139

Single/HOH         Age 65 or older ...........          . $20,997          $30,572     $38,232

MFJ/RDP              Under age 65  ............           . $29,599          $42,366    $51,941or

MFS                      Age 65 or older (one spouse). $35,799         $45,374     $53,034

MFS                     Age 65 or older (both spouses/RDPs)

                                                                                    $41,999           $51,574    $59,234

QW                     Under age 65 .......................     n/a                   $27,564     $37,139

QW                    Age 65 or older ...................      n/a                    $30,572     $38,232

[jwald]

Hi Amy - Thanks for the reply! I agree there is some California income here from prior to my move, but my question is related to the income after my move which was still subject to CA state tax withholding by my employer. Am I entitled to report that portion of my income as exempt from CA state tax, or must my entire year's income from my CA employer be subject to CA state tax because my "office location" is there, despite the fact that I reside in WA as of June 27th and haven't set foot in CA since then?

Appreciate your help! 

[AmyC]

Yes, you just don't like my answer - I don't either! CA sourced income is taxed by CA. Ca is the most aggressive state in the nation with the way they tax. As long as your employer has you as CA sourced income, you will be paying taxes to CA.

If your employer is a CA company, you have CA source income. Even as a contractor, you would pay CA tax. There is no way out currently.

The only out is if you make it through the chart I created. So, if MFJ and made less than $30k CA income, off the hook. It gets worse as a non-resident.

Moving forward, same exact chart is used for nonresident. Nonresidents. Taxpayers must file if they have any California-source income and income from all sources is more than the amount in chart.

[jwald]

Hi Amy! Respectfully, it's not that I don't like the answer, apologies if it seemed that way. Just trying to make sure I get it right, as these things are always nuanced and I've heard different answers from different tax professionals.

My understanding was that CA sourced income wasn't a function of where the company is located per se, but rather where the work is performed. Is that incorrect? Here are some of the references I've been reading on that front:

https://moskowitzllp.com/what-is-california-source-income/

"Wages and salaries for services performed in California, regardless of the location of the employer or the employee (or where the payment was issued), are taxable to nonresidents."

https://www.palmspringstaxandtrustlawyers.com/nonresidents-working-remotely-for-california-businesse...

"And for purposes of taxing employees, the source of income from services is the location where the services are performed."

"But what if the employee is a nonresident who never has to set foot in California to perform his services?  Then the source rule works in the nonresident’s favor, even if the employer is California based. Remember, the source of the services is the location where the employee’s work is actually performed, not the location of the employer. A nonresident programmer who monitors and upgrades satellite dish software for a Los Angeles-based media company, all while sitting comfortably in front of his computer in his Austin, Texas condo, doesn’t earn California-source income and doesn’t have to pay California income taxes."

http://www.calresidencytaxattorney.com/nonresidents-working-remotely-in-california

"The FTB will also investigate any "duty days" the employee spends in California. Even if an employee legitimately changes residency and works remotely, if the employee is required to make trips to California to perform work in-state (which is often the case), then the income related to working while physically present in California is taxable by California, regardless of the employee's residency status."

[AmyC · Accepted solution]

There has been a big shift in people working from home the last few years. Contractors, etc. We are seeing states shifting their views each year. There are a couple of states that actually tax based on the other state involved. It is really very messy. It is going to continue shifting and evolving.

And... I finally remembered one of the big shifts with CA. You are right, the CA source income is not going to require a return. Thank you! I apologize! There was a big shift this year.

Take the money and run Enjoy WA!!

[DeniseTwo]

Hi Amy C, Can you share where you found the "big shift" info for CA remote work?  I have a friend that is needing this to do her taxes.  But I want to get an "official" source so she can figure out if she no longer needs to include her remote work as CA source income.  She is a W-2 worker. Thanks.

[Vanessa A]

This link does not specifically exclude remote workers, it discusses if the employee is located in another state the need to pay taxes to the other state instead of CA.

Payroll Taxes

[TomD8]

@DeniseTwo --

CA taxes the wage and salary (W-2) income of non-residents only if that income is California-sourced.  Wage and salary income is "sourced" where the work is actually performed.  Therefore the wage and salary income of a CA non-resident working remotely from a location outside CA is not taxable by CA.  See Wages and Salaries on page 6 of this CA tax publication:

https://www.ftb.ca.gov/forms/2021/2021-1031-publication.pdf