US Diplomat Abroad

[rudyk1515]

Hello. I moved to Romania under diplomatic status on June 13th, 2024 since my husband works for the state department. I kept my job, but was moved from an employee and now work as a 1099 for a US based company. I understand that I still need to pay Federal taxes, but do I continue to pay California taxes even though I do not live there and will not move back to California again?

[tagteam]

I will page Champ @pk for input for your question. 

[TomD8]

If you have abandoned your domicile (your main, primary home) in California, and have established it in a new state or country, then for 2024 you will file a part-year resident California tax return.

CA can tax all the income you received while a California resident.  Once you became a CA non-resident, only your CA-source income would be taxable by CA.

Be aware that CA considers any income you receive as a non-resident independent contractor (income reported to you on a 1099-NEC) to be CA-sourced if the client receiving your services is located in California.

[pk]

@rudyk1515 , agreeing with my colleague @TomD8 ,  and adding a few references ----

(a) generally  the IRS rules on sourcing of income  is  recognized as  same as your tax home I.e. where performed.  Thus since you are living abroad ( Romania )  your income  source  is  Romania  and eligible for  Foreign earned income exclusion   ( since you are not employed by an embassy.

(b) For California purposes, the drive to Market based economy -- the sourcing is based  on  whom is the beneficiary of the work  -- a customer based in CA or a customer's customer  based in CA.   It is a case of economic  nexus.    See this ref.  ( you are an independent  contractor   doing business  in CA  and so the  thresholds apply ) -->  Doing business in California | FTB.ca.gov.

(c)   I have no clue  how they plan to enforce this  when a business  buys services from a person in China ( or any other country ) and directly pays  an amount  on the borderline of the threshold.  But I understand why they are doing this.

Good Luck