Visited son in CA for 4 mo and worked for same employer as IN. W-2 shows gross wages for IN and CA in box 2 and CA wages broke out. Do I need to file NR return in CA?

[tbush839]

My permanent residence is IN and I can transfer from store to store if gone for more than 30 days.  The W-2 shows IN and CA wages under Gross Federal wages but it breaks out under State Wages for CA and IN.  However, the IN state wages listed are total gross federal wages so appears I will be paying twice on income earned in CA if I file as NR (non resident) there and  permanent resident in IN.  According to turbotax and CA online resources though, I need to do two tax returns?  Also, I was not renting or buying in CA - stayed with relative while visiting.  

Lastly, CA is wanting to tax my gains on mutual funds that were sold during time I was there even though they are not related to CA property of any sort.  In fact, they were sold and reinvested within the mutual fund account.  Can that possibly be right?

[Vanessa · Accepted solution]

Yes, you will need to file both an IN and CA return.  

Your W-2 is correct. "Full-year Indiana residents must report all income that is reported for federal income tax purposes on their Indiana individual income tax return (Form IT-40). This includes all income, even if it is derived from sources outside Indiana."https://www.in.gov/dor/files/ib28.pdf  

You will file the CA state as an NR first and then you will take a credit for taxes paid to the other state on your IN return.  

If CA is trying to tax you on the sale of your mutual funds, this may be because you are filing a part-year resident return.  If you were a Nonresident, then you will need to change the filing status on your CA return if it is showing you as Part-Year.

• Nonresidents of California - Taxed only on income from California sources.
• Part-year residents of California - Taxed on all income received while a resident and only on income from California sources while a nonresident.https://www.ftb.ca.gov/individuals/filertn/nonresidents-part-year-residents.shtml#how_taxed

Lastly, because you were in California for 4 months, here is a link with more information on determining your residency status.  https://www.ftb.ca.gov/individuals/filertn/nonresidents-part-year-residents.shtml#residency_status