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?
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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.
@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
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