Resided in Washington DC but paid CA taxes

[ik]

Hello,
Last year my son moved from California (where our residence is) to Washington DC for work. He lived there for the entire year. His employer was taking out CA state taxes from his paychecks which is reflected on his 2019 W-2. No DC taxes were paid. Someone has told me that it was a mistake and he should have paid Washington DC state taxes instead. Is that correct? If that’s the case, what should I fill out, in the Intuit, for my son to receive CA refund and pay DC taxes?

Thanks!

[TomD8 · Accepted solution]

He must file a DC tax return.  DC regards a person as a resident of DC - and therefore subject to DC taxation -  if they "maintained a place of abode in DC for a total of 183 days or more even if their permanent home was outside of DC."

https://otr.cfo.dc.gov/page/individual-income-tax-filing-faqs

He may also have to file a CA tax return.  CA regards a person as a CA resident - and therefore subject to CA taxation - if that person is domiciled in CA, but outside CA "for a temporary or transitory purpose."  CA's guidelines for determining residency for tax purposes are a bit complicated, and are detailed in this publication:  https://www.ftb.ca.gov/forms/2019/2019-1031-publication.pdf

[ik]

Hello again, 

In reference to my original question and in response to TomD8's answer, it looks like my son must pay DC taxes because he lived in DC for the entire 2019 (and he's still there). I don't think he should be paying CA taxes because he has been away from CA since June 2018. Please let me know if you disagree. 

If you agree with my thought process above, should my son pay DC taxes on the fellowship, he received upon his graduation from CA University, to work at the Senate in DC? 

What TurboTax plan would allow me access to the CA 540 for non-residents?

Thank you!!

[TomD8]

If his fellowship is taxable (some are and some aren't, see https://www.irs.gov/taxtopics/tc421), it would be taxable by his state of residence at the time he received the money.  Per statute, he was a resident of DC for tax purposes for all of 2019, thus ALL his 2019 income is taxable by DC.

With regard to his possible 2019 tax obligations to California, you must decide his CA residency status based on the rules outlined in CA FTB Pub. 1031, which I referenced in my previous answer.  I would particularly refer you to page 6, "Leaving California".   If you determine that he was a legitimate non-resident of CA for all of 2019 according to CA's published rules, he would have no tax obligation to CA unless he had CA-source income during the year.

Note that it is possible for a taxpayer to be a domiciliary resident of one state and a "statutory" resident of another state at the same time. 

[ik]

Hi TomD8, 

Thank you for pointing me to a valuable resources! Based on that I determined:

1. My son's fellowship is a taxable income. 

2. My son is a CA nonresident. I reviewed the Pub 1031, Leaving California section, and found the example 7 is the most applicable to his situation. My son is single and his only ties to CA are his parents. He left to work in DC right after his college graduation, mid 2018 and at the moment he has no plans on returning to CA. He visits us for no longer that a month a year. Based on this info, do you agree that he is a CA nonresident?

The reason I asked how I can access CA 540-NR form in TurboTax is because my son's 2019 W2 employer withheld CA state taxes from his paychecks, not DC's. So we need to get CA to refund this money. I understand it can be done through CA 540-NR filing. Please advise. 

Thank you so much!

[TomD8]

In order to obtain a refund of the withheld CA taxes, your son will need to file a non-resident CA tax return, Form 540NR,  showing zero CA income.

If he has "abandoned" his  home in CA, now makes his permanent home in DC and has no intent to return to CA, then he has made DC his domiciliary state and he is no longer a resident of CA.  If CA questions his residency status (which they might), I would tell them that he has literally moved to DC with no intent to return to CA.  And it would help his case greatly if he can show them that he has a DC drivers license, DC license plates on his car, and is registered to vote in DC.

And if he hasn't done so already, he should ask his employer to start withholding DC taxes.

[ik]

As of 2020 my son's employer is withholding the correct, DC taxes. 

As of this moment, my son has no intention on returning to CA. He's been renting an apartment in DC since mid 2018. He has no car but his DL and voting registration are still CA... Do you think it's critical for him to change it to DC?

What TT option should I use, to prepare 2019 return, in order to have access to Form 540NR?

I really appreciate all your advice! This DC vs CA residence is giving me a headache 🙂

[TomD8]

If he has no intent to return to CA he definitely should obtain a DC drivers license and he should register to vote in DC.  

To access CA Form 540NR, go to the personal info section of TT and enter his State of Residence as DC, and indicate that he had Other State Income from CA.  This will prompt the program to produce the 540NR.  When you do the 540NR, allocate zero income to CA.

[ik]

After I indicate that he had Other State Income from CA would the system also allow me to fill out the DC state taxes form in addition to Form 540NR? Thank you!!

[TomD8]

Yes.

[ik]

Thank you so much, TomD8 !

[ik]

Hi TomD8!

I'm working on my son's return. I selected DC as his state of residence but I don't see a question where I can indicate that he had Other State Income from CA.  On the "My Info" page there are only two questions related to  State: State of residence and I lived in another state in 2019 Y/N (which he did not). Could you please advise?

Thank you!

Happy Sunday!

[TomD8]

Click on Personal Info.  On the first page that opens, scroll down and you'll see the section titled Other State Income.

[ik]

Awesome! Thank you.