Recently moved to MN, now working remotely for prior employer based in CA

[jachang0503]

Up until May of this year, I was living in California and working for a Californian employer. I moved to Minnesota at the beginning of May, though I'm employed with same company and am now considered a permanent remote employee working from MN; however, Californian income tax is still being withheld from my paychecks. My company is in the process of rectifying that, but until then, am I correct in assuming the following:

1) I am to file a non-resident return for California for the income I earned there from January to April, when I was still living there, and a resident return for Minnesota for the remainder of 2022.

2) Because my employer is not withholding income tax for Minnesota (yet), I must make quarterly tax payments to Minnesota until they do.

3) I'm entitled to a refund of the amount being withheld for Californian taxes while I live outside of California.

Bonus question: is there any circumstance under which I would qualify for a credit to taxes paid to another state in this scenario, or would asking for a refund from California as outlined in point 3 above cover that?

Thank you!

[Hal_Al]

Yes, all your assumptions are correct, except you do not need to make MN estimated tax payments for 2022, since you have not previously file a MN return (there is no underpayment penalty for the first year you file in a state).  If you would rather not owe, at tax tax, you can have your employer increase the amount withheld for the rest of the year.

Q. Is there any circumstance under which I would qualify for a credit to taxes paid to another state in this scenario, or would asking for a refund from California as outlined in point 3 above cover that?

A. Asking for a refund from California as outlined in point 3 above covers that.

[TomD8 · Accepted solution]

To nitpick a few points:

For 2022, you will file a part-year resident return for each of the two states.  On those returns you will allocate your income earned as a CA resident to CA, and your income earned as a MN resident to MN, but you will report your withholdings exactly as shown on your W-2.  (You will be able to do the income allocation with TurboTax.)

You are not eligible for an "other state credit" because none of your income is double-taxed (taxed by both states).

You will probably wind up with a refund from CA and taxes due to MN, unless you pay some estimated taxes to MN.  As @Hal_Al pointed out, you are not required to do so.

[jachang0503]

Thank you @Hal_Al and @TomD8 for your responses! Concerning this statement, however:

Hal_Al: "there is no underpayment penalty for the first year you file in a state"

...there's an additional wrinkle: I've lived in Minnesota previously and filed taxes here before! Since this technically won't be the first year I file in this state (though I haven't done so as a resident since 2013), does that change my need to pay estimated taxes?

[Hal_Al]

Q.  Since this technically won't be the first year I file in MN (though I haven't done so as a resident since 2013), does that change my need to pay estimated taxes?

A. I  would think that doesn't change anything, but don't know for sure.  The general rule, for states, is: if your previous year tax liability was 0, no estimated payments are required. 

[TomD8]

@jachang0503 --

See "Who Should Make Estimated Tax Payments?" in this reference:

https://www.revenue.state.mn.us/estimated-tax

[jachang0503]

Ah, I get it - because I'm a part-year resident who'll have at least $1 of Minnesota tax liability for 2022, I'm eligible to use 100% of my tax liability in 2021 for estimated tax payments. But because my prior year's total tax liability in Minnesota was nothing since I didn't live here, my estimated tax payments for this year can be equal to $0 without incurring a penalty! Good to know, although I'm not sure paying a giant lump sum in taxes feels substantially better than parceling it out over the course of a year...

Thanks again for your replies!