State listed in 1099=must pay taxes on it, even if non resident

[Marc22]

On most 1099s and W-2 statements a state is listed on the form you receive. If you are a non resident of California when  you receive a 1099 that includes CA on it, do you need to pay tax on it anyway as a nonresident, just because it is marked CA on the 1099?

[rjs]

What kind of 1099 do you have? There are 21 different kinds. There is no plain Form 1099. All 1099 forms have one or more letters after the 1099. The most common are 1099-INT, 1099-DIV, 1099-B, 1099-NEC, 1099-R, and 1099-G.

Where exactly on the 1099 form does it say California or CA?

Investment income, on a 1099-INT, 1099-DIV, 1099-OID, or 1099-B is considered income from the state that you lived in when you received the income, no matter where the account or payer is located. The same is true for retirement income on a 1099-R. You only pay tax on it to the state that you lived in.

The situation might be different for other kinds of 1099 forms.

[Marc22]

Thanks rjs,

On a 1099-R block 15 is titled ''State/Payer's state no''. I did not see a state listed on 1099-Bs, or 1099-INT or 1099-DIVs

As far as I can see, the only thing a state would see is the total amount of gain or income for the year that you enter on the tax form for the 1099s mentioned above, with the exception of when you sell stock on Form 8949, where it reports the date you bought and sold the stock.

I think on the California part year 540 form it only asks how many days you were in CA.  So, I think all the CA is going to do is take a ratio or time spent in CA compared to somewhere else.  So I am not sure how I can identify what state that I was in when I sold the stock or received the income.

What is you take on this and advice?  So I am thinking that if your 1099-R states CA, it will be allocated towards CA, even if I was a Utah resident when it was received.  I then would get pinged by CA if that CA income was not added to CA state taxes.

[rjs]

Did you move from one state to the other during the year? If so, you have to file part-year resident returns for both states.

Which state did you move from and which state did you move to? On what date did you move?

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@Marc22 wrote:

So I am not sure how I can identify what state that I was in when I sold the stock or received the income.

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The 1099-B has the date of each stock sale, so you easily see which state you were a resident of on the date of the sale. For interest and dividends from an investment account, the financial institution usually gives you a list of all the payments you received during the year. It would be a separate or supplementary statement, not part of the actual 1099-INT or 1099-DIV. For interest from a bank, you can just allocate it based on how many days you were a resident of each state.

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@Marc22 wrote:

So I am thinking that if your 1099-R states CA, it will be allocated towards CA, even if I was a Utah resident when it was received.

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No. If you were a Utah resident when you received the payment, it is Utah income, no matter what the 1099-R says. You still haven't said where on the 1099-R it says California. If box 15 say CA, is there any state tax withheld in box 14 or a state distribution amount in box 16? If there is an amount in box 16, is it the same as box 1?

The state is not going to figure out how much of your income is from each state. You have to figure that out and enter the correct amounts when you prepare your state tax returns. If the 1099-R is for a single withdrawal or distribution, you have to allocate it to the state you were a resident of when the distribution was made. If it's for multiple payments, or monthly payments, allocate it based on which state you were a resident of on the date of each payment.

[Marc22]

Thanks rjs again for your help.

I am actually planning all these things for this year.  We have a house in CA and are buying one in Utah.  We want to keep both houses and winter over in CA, and go there in the summer to go to the beach.  So we will spend more time in UT and can justify making either state our domicile, as we don’t know how we will like Utah.  We will probably buy the house about 1 Sep of this year.

For the 1099s I mentioned like the 1099-R and the W-2.  For 2020, CA is listed in block 15 for both.  For both  block 16 has ‘’state wages, tips, etc’’ with a dollar value in it. So I imagine this value is then reported to CA.

In TurboTax I can say when we moved from one state to another which will then input the number of days into each state return and then it will calculate a ration of wages to each state. I can see how I can split out the income by date as you say but am not sure how I will add this to the state returns when the only options seems to be adding the date moved

[JohnB5677]

Possibly not!   

If you physically worked in California you will have to pay taxes to California for that portion of your income.  You will also have to file a return for your home state (If you have income tax).  You will get a credit for the taxes paid in CA on your home state tax return up to the amount the tax in your state would have been.

If you did not physically work in California you will not owe CA taxes.  However, if taxes were withheld for CA you will have to file a CA tax return to recover the taxes you had paid. 

[rjs]

You will have to research each state's definition of "resident" for income tax purposes, which might be different from the definition of resident for other purposes. Because every state has a different definition of resident, it is possible to be considered a resident of more than one state. You can have only one domicile, but you can be a resident of more than one state. Whether you have to file your state tax returns as a resident or a nonresident depends on the definition of resident for income tax purposes, not on your domicile.

[Mike9241]

if you tell us what the 1099 was for we can provide more info on taxability in CA.

[Marc22]

Mike,  Thanks for the response.

I have 3 1099-Rs and one W-2.  CA is marked in box 15 and box 16 has dollar values in it.  I plan to spend about 6 months in each state, so I am not sure if I should change the state designation or address for each account every 6 months depending on what state I am in or just pick one state and leave it there if doing that will not make that income CA or UT sourced income.

[DianeW777]

The following are the definitions of domicile for each state. The state where you determine is your domicile will be your resident state which is where you must report your worldwide income.  A nonresident state must be filed, for income earned in that state.  Your resident state will generally provide a credit for taxes paid to a nonresident state to eliminate double taxation for you.  The credit will be the lesser of the amount you would be taxed in your resident state or the amount of actual tax liability in the nonresident state.  

From the California (CA) Pension and Annuity Information (page 3): Federal law prohibits states from taxing the retirement income of nonresidents.

• US Code Section 114

California (CA)  Am I a resident?

You’re a resident if either apply:

• Present in California for other than a temporary or transitory purpose
• Domiciled in California, but outside California for a temporary or transitory purpose

There are more factors for determining residency. Visit Guidelines for Determining Resident Status (FTB Publication 1031) for more details.

Utah (UT) Am I a resident?

Tests for Utah Domicile

Test 1

You are domiciled in Utah if:

1. You or your spouse claimed a child tax credit (IRC §24) for a dependent on your federal tax return, and the dependent is enrolled in a Utah public K-12 school. This does not apply if you are the dependent’s noncustodial parent and are divorced from, or were never married to, the custodial parent.
2. You or your spouse is enrolled as a resident student in a Utah state institution of higher education.

Test 2

There is a rebuttable presumption you are domiciled in Utah (i.e., you are domiciled in Utah unless you can prove otherwise) if you or your spouse:

1. claims a residential exemption for a primary residence under UC §59-2, Property Tax Act,
2. voted in Utah during the taxable year and were not registered to vote in another state during that time, or
3. file a Utah income tax return as a full-year or part-year resident.

Test 3

Even if you do not meet any of the conditions above, you are still domiciled in Utah if:

1. either you or your spouse has a permanent home in Utah to which either of you intend to return after being absent; and
2. you or your spouse has voluntarily settled in Utah, not for a special or temporary purpose, but with the intent of making a permanent home.

Under Test 3, whether you have a permanent home in Utah is based on a preponderance of the evidence (i.e., the evidence you have a permanent home is more convincing than any evidence you do not), taking into consideration all of the following facts and circumstances:

• You or your spouse has a Utah driver’s license.
• You or your spouse claims a federal tax credit (IRC §24) for a dependent who is enrolled as a resident student in a Utah state institution of higher education.
• The nature and quality of the living accommodations you or your spouse has in Utah compared to another state.
• You have a spouse or dependent in Utah for whom you or your spouse claims a federal tax credit under IRC §24.
• The physical location where you or your spouse earns income.
• The state of registration of a vehicle owned or leased by you or your spouse.
• You or your spouse has a membership in a church, club or similar organization in Utah.
• You or your spouse lists a Utah address on mail, a telephone listing, a listing in an official government publication, other correspondence, or similar item.
• You or your spouse lists a Utah address on a federal or state tax return.
• You or your spouse claims Utah residency on a document (other than a Utah income tax return) filed with or provided to a court or other government entity.
• You or your spouse fails to obtain a permit or license normally required of a resident in the state where you claim to have domicile.
• You are the noncustodial parent of a dependent enrolled in a Utah public K-12 school for which you claimed a child tax credit (IRC §24) on your federal tax return, and you are divorced from the custodial parent.
• You maintain a place of abode in Utah and spent 183 or more days of the taxable year in Utah.
• You or your spouse did not vote in Utah during the taxable year but voted in Utah in any of the three prior years and was not registered to vote in another state during those three years.

[Marc22]

Thank you Diane for your reply.

We will live in both Utah for about 6 months each, so we will be part year residents in both and will have to pay taxes in both states.  We could justify being domicile in either state, as it is unclear where our intent to end up will be at this point.  Unlike most states where domicile means you are a resident, CA separates the two, where as you could be domiciled in CA and not even live there, paying taxes in another state.

It seems that which state I choose to be domiciled in does not really matter for taxes, as I will be part year residents of both.  We want to sell the CA some day and get the 2 out of 5 year tax capital gain exclusion when we sell the home.  If we spend 24 months in CA, and then change domicile to Utah, we should be able to sell the CA home and get the exclusion if we sell the home within 3 years period even if CA is no longer our principal residence.

That is how I understand it unless I have something wrong?

[DianeW777]

Yes, it is correct that if you live in your main home for 24 months of the five years preceding the date of sale you will be entitled to the exclusion. Also you should be a resident of that state for the same period.  This should be a consideration when determining residency/nonresidency status. It would eliminate the question of whether you lived in the home for the required period.