I am planning to rent a small apartment in CA for my wife and my daughter while I will keep working most of the time (60%+) from WA. My employer won’t change my location for the W-2.
The only salary we will get is coming from my job. When filling taxes next year I am planning to continue filing taxes jointly with my wife.
I have some questions for you:
- Because we rented an apartment in CA for my wife and my daughter, is there any risk that CA will try to collect taxes against 100% of my salary in WA just because we are filling jointly our tax return? (My employer will keep showing me in the W-2 as based on WA)
- If I work from CA 40% of the time, so I can visit my family, will I have to pay CA taxes against 40% of my salary and any other income during the year (i.e. dividends and interests)?
- How will CA determine how many days I have worked from CA vs. WA?
Here is a link to the California Franchise Tax Board (FTB) publication that describes what determines whether you are a California resident for income tax purposes.
One of the things that is discussed in the publication is the concept of domicile, which is different from residence. In most cases, if your domicile is in California you will be considered a California resident, even if you don't spend a lot of time there during the year. The California FTB is very aggressive about treating people as California residents. With your family in California, you would have a hard time convincing them that California is not your domicile.
If you are considered a California resident, all of your income is subject to California tax, no matter where the income is from. If you worked in a state that has income tax, there would be some allocation of tax between the two states based on how many days you worked in each state. But since Washington has no income tax, as a California resident you would simply pay California tax on all your income, and it wouldn't matter how much of the income is earned in California and how much is earned in Washington.
Thank you for your answer.
But the point is that my daughter is starting college. She will live in the apartment and my wife and I will have a place to stay. It is just that my wife will be able to stay longer in San Diego than I, because she is not currently working.
Read the FTB publication and see if you will be considered a California resident. If you are a nonresident of California, you still have to pay California income tax on the money that you earn for the time that you work in California. You will have to file a California nonresident tax return. Your employer is supposed to keep track of the amount of time that you work in each state, and report your California income separately in the state section of your W-2. They wouldn't normally show your Washington income on the W-2, since there is no Washington income tax. So California doesn't determine how many days you worked in California. Your employer tells them how much California income you had.
If your employer does not have any other employees in California, they might not want to report your California income because they would have to register as a California employer, withhold California taxes from your pay, pay California payroll taxes, and probably pay other California business taxes. But legally they are required to report how much they pay you for working in California.
Investment income, such as dividends and interest, is treated as being from the state that you live in when you receive the income. So if you are not a California resident, you would not have to pay California tax on your dividends and interest.