Taxed on the same income twice!

[sandy-vb]

Hi,

I was student in Utah in the year 2016 for the entire year. I interned in California during 3 summer months. I had two W2s, Utah (total income of ~$15,000) and California (total income of ~$65,000). My total federal adjusted gross income was ~$80,000.

I paid the state tax in Utah and California corresponding to the incomes earned in Utah and California respectively. However, today I saw a notice in my mailbox saying that I owe ~$4000 to the state of Utah, because my 'Utah Adjusted Gross Income' was ~$80,000, and not $15,000, as I had previously claimed. In other words, 3 years later, Utah is asking me to pay taxes on an income that has already been taxed by California State. Why should I be taxed on the same income twice?

Does this look correct? Should I contest this claim by the Utah tax commission? If no, what is the recourse for me? If Utah's claim is correct, should California be refunding me? I apparently can't even contest the claim because the last date to contest, which was June 27, has lapsed because of them delivering this letter to an incorrect address, despite clearly having notified them in my previous correspondence about my address change.

I would be grateful to any help on this forum. Thanks in advance.

Sandesh 

[Rainman12]

1) Tax Rates are/can be legitimately determined by Total income. If your UT return somehow did not consider that as a factor, then more taxes are likely due.

2) States normally provide a credit for taxes paid on the same income to another State. In which sequence did you prepare your UT and CA returns? Does credit for CA taxes paid appear on your UT return, and/or opposite case?

[sandy-vb]

About the sequence - I filed both the taxes together on Sprintax (the only available option for non-resident students). I see that Utah Tax Return doesn't have any mention of California, but California State Tax return does factor in Utah taxes.

Does this mean that for tax purposes, I was considered a California resident? I'm not sure I Sprintax inferred that. It is true that I had moved to California permanently in the last week of 2016, an information I provided Sprintax, but not sure if that makes me a California resident for tax purposes for the year 2016.

[rjs]

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[Anonymous]

it would appear your are not domiciled in Utah for 2016 (based on 2018 instructions)

you may be a resident (full year or part year) however:  

even though domiciled (permanent residence) outside Utah, you maintained a place of abode (where were you living while attending college)  in Utah and probably spends 183 or more days of the taxable year in Utah. When determining whether a person spends 183 or more days in Utah, a "day" means a day in which the person spends more time in Utah than in any other state.   (i'm putting it this way because you say you filed as non-resident  which would require a permanent place of abode outside Utah) 

Part-Year Resident Defined 

A part-year resident is a person who is a Utah resident for part of the year and a nonresident for part of the year. All income received during the period of Utah residency is taxable in Utah, regardless of where that income is earned, unless specifically exempted. Income from Utah sources is taxable in Utah during the period of nonresidency.  

you would probably be considered a part -year resident not a non-resident 

you needed to file form TC-40B (for part-year and non residents) along with your Utah return.  That way your California income would only be taxed there and you Utah income would only be taxed there

Utah, based on whatever info they had, regarded you as a full year resident.

The notice probably contains a contact number which you should call to get advice on how to correct the situation.    

In the worse case scenario, Utah says "no" you a full year resident, they would have to grant credit in whole or part for the taxes paid to Ca

you may have an additional problem,  since it seems you had a permanent place of abode outside Utah, if it had an individual income tax for 2016 and depending on the tax laws there,  you may have been required to file at least a part year return (you say you move to Ca permanently in December) 

[TomD8]

Utah is taxing you as a resident.  If they are correct and Utah is your home state (meaning you're not just living there temporarily to attend school), then Utah can legitimately tax ALL your income, including your income from California.  But in that situation, you can claim credit on your Utah return for the taxes paid to California, so your California income will in effect NOT be double-taxed.

If this describes your situation, you should have filed a non-resident return in CA (reporting the CA income) and a resident return in UT, reporting ALL your income but claiming credit for the taxes paid to CA.

In other words, if your state of legal residence - your home state - is Utah, then your taxable Utah income is indeed ~$80,000.