Sole Proprietor with CA source income as CA nonresident

[dr-nmayeda]

I am a sole proprietor residing in Oregon throughout all of 2023. I completed my federal + OR state returns in TT and then realized based on jurisdiction laws, I am supposed to be filing a CA return for the services I provided to CA-based clients (remotely). I cannot figure out how to actually apportion my entered income in TT between CA & OR, but perhaps it's because I need to delete all my OR data and restart with CA first? I updated my Personal Info section to show income from another state, but don't see any obvious places to provide my income breakdown in the State Return section. Thanks in advance!

[MayaD]

You don't need to delete your OR return. There are some states where you prepare your resident state return first and then prepare the nonresident return and Oregon is one of those. 

How do I file a nonresident state return?

Income from services provided in CA is taxable on your OR and CA returns. However, CA allows non-resident who are residents of Arizona (AZ), Guam (GU), Oregon (OR), and Virginia (VA) to claim Other State Tax Credit on schedule S if they had income that was taxed by California and their states. The credit will offset the taxes paid to the other state, so you are not paying taxes twice. To check if you qualify for the credit, visit Instructions for Schedule S.

  California source income for independent contractors/sole proprietors is determined by looking to where the benefit of the service is received by the customer.

Only CA source income is taxable on your CA return. The income generated from business you conduct within California is California source-income. 

@dr-nmayeda

[Edited 04/08/2024, 10:34 AM,PST]

[dr-nmayeda]

Just wanted to double check that it is still true for 2024 tax prep that Turbo Tax wants me file my OR (resident), THEN CA (nonresident) return? Same conditions as last year - I'm a sole proprietor with CA source income and reside 100% in OR.

I keep seeing warnings of nonresident returns first so want to re-confirm I'm one of the inverse ones...

[KeshaH]

This is still true. You will take the credit on your CA return insead of your OR return.