I live in California and will be visiting family for 3 weeks in Arizona and then returning. I plan to work remotely while there and am confused on a couple of things.
-60 day exemption. Does this apply to my situation or will my employer have to deduct income tax for the 3 weeks I'm there? They aren't currently registered in AZ for payroll tax purposes.
-Non-resident filing. Am I considered a non-resident if I'm just visiting family temporarily for a few weeks? And if so, am I required to file taxes as a non-resident? Would I still have to do this even if the 60 day exemption applied?
Are an employer's tax withholding responsibilities a completely separate can of worms from what I as an individual am required to report / do? Thank you for any help, the more I look online the more confused I've gotten.
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Income from work you perform from an AZ location is AZ-source income and is taxable by AZ. You must file a non-resident AZ tax return if your income exceeds AZ's filing requirements for non-residents, which are detailed here:
Since your employer is California-based, it must withhold CA income tax from your pay, including your remotely earned income. Your CA employer is not required to withhold AZ taxes. ALL your income is taxable by your resident state of CA, regardless of where you earn it. The 60-day rule you referred to applies to AZ employers, not to CA employers.
If your income requires you to file in AZ, you will be able to claim a credit on your AZ return for the taxes paid to CA on the AZ-source income. The credit prevents double taxation, which is prohibited by federal law. If you use TurboTax, be sure to complete your home state CA return before your non-resident AZ return. The program will then calculate and apply the credit.
Q. If I'm just visiting family temporarily for a few weeks and working remotely, am I required to file taxes as a non-resident and pay AZ income tax?
A. Yes, but "nobody" does. See http://money.cnn.com/2013/06/28/pf/taxes/business-traveler-tax-threat/ If you live in a state without an income tax (e.g. FL or TX), it’s more likely you should file in the work states. You can't use the "it all comes out even" rationale for not filing.
Q. Would I still have to do this even if the 60 day exemption applied?
A. Yes. The 60 day rule is only about whether the employer has to do withholding. You are still required to pay tax for fewer days.
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