out of state 1099-NEC

[MMAZ1971]

I live in Arizona but receive payment and a 1099-NEC from a California company.  Do I pay state taxes in California and Arizona?

[MarilynG1 · Accepted solution]

No, if you lived in Arizona all year, and are Self-Employed, all your income is considered to be earned in Arizona and reported on your Arizona Resident State Return. 

You don't have to file a California return because your employer is located there.

If California Taxes with withheld on your income, however, you can file a  Non-Resident State Return to get them refunded to you. 

[TomD8]

 @MarilynG1 's answer may not necessarily be the case.  Due to a 2019 court decision (the Bindley decision), CA may now tax non-resident sole proprietors who provide services to CA-based clients, even if the sole proprietor never set foot in California.

https://www.coblentzlaw.com/california-office-of-tax-appeals-gives-precedential-authority-to-bindley...

 https://www.calcpa.org/news/2019/12/19/tax-net-widens

https://www.halversontax.com/out-of-state-taxes-california/

[C-Note]

Please help me.

I'm a California resident. In addition to my W-2 job, I did contract work for a firm in New York. They sent me a 1099-NEC for $6k, no tax withheld.

1) Do I need to file a NY return in addition to my CA return? 

2) If not, what do I need to do.

Thank you

[KrisD15]

No, since it was only 6,000 unless you are a dependent. 

If the income was earned by a business located in NY, (even when that is not your business) you would need to file a New York non-resident return if you earned more than the NY standard deduction which for a non-dependent is 8,000.

New York Source

[stephaniediaz1192]

I have a similar question. I live in Illinois (and lived in Illinois all year) but received payment and a 1099-NEC from Nebraska. Do I pay state taxes for IL or NE? The amount was just under 2K

[LenaH]

It depends. Your resident state of Illinois taxes you on all of your income. If you earned the money in Illinois, then you do not have to file a Nebraska return. If you earned the money in Nebraska, then you will have to file a nonresident return in the State of Nebraska. Per the State of Nebraska, nonresidents who earn wages, salaries, or other compensation in Nebraska must file a Form 1040N and Nebraska Schedule III.

If you do have to file a nonresident return for Nebraska and are liable for Nebraska tax, then Illinois will give you a credit of taxes paid to Nebraska so that you are not double-taxed. In addition, please complete the Nebraska return before your Illinois return so that the credit computation is accurate. 

@stephaniediaz1192

[honopdx]

I live in Oregon and received two 1099-NEC for 2022

First one is 1K from Illinois

Second one is 5K from Massachusetts

Am I required to file nonresident state taxes in the above states?

I believe both amounts are below each state's standard exemption, however I am a little confused if the income is considered business income or personal income, and if business income is taxed differently. I don't have an official "business. " The nature of the work is speaking and expert witness, respectively.  

Thank you.

[honopdx]

One more question:

Could this income be considered sporadic activity? And thus, could I file this using Schedule 1?

I do not routinely speak for fees or do expert witness work, and very likely will never again.

I'm also wondering if I need to file Schedule SE? I wouldn't say I "engage in trade or business".

Thanks for any advice. It's much appreciated.

[MonikaK1]

If each of these payments was for a one-time event, and you don't regularly do independent contractor work, then you could designate the Forms 1099-NEC as a "sporadic" activity in TurboTax and not need to prepare a Schedule C or Schedule SE. 

However, if the amount shown on Form 1099-NEC isn't entered on a tax return as self-employment income, it may lead to a notice from the IRS proposing to assess self-employment tax on the amount.

Please see this thread for a detailed discussion of this topic with other examples and options.

Please also see this TurboTax help article for more information.

The Illinois personal exemption amount for tax year 2022 is $2,425. You would need to file a nonresident Illinois return if you have Illinois income exceeding this amount. See here for more information.

If you're a nonresident of Massachusetts, you must file a Massachusetts Income Tax Return if you received Massachusetts source income in excess of your personal exemption multiplied by the ratio of your Massachusetts source income to your total income, or your gross income was more than $8,000.  See here for more information.