Background. You generally owe income tax on all your world-wide income to the state where your permanent residence is located. If you have income "sourced" from another state, you may be required to file a non-resident tax return for that state to report only the in-state income, and then you file your resident state return to report all your worldwide income and pay tax, but your home state will give you credit for out of state taxes you pay on the same income. For example, suppose you earned $50,000 and your home state tax on that was $1000, but the CA tax was $1500. Your home state should give you a credit of $1000 (what your home state would have charged you) so your net state income tax is $1500 but not $2500. (This is not an issue if you live in one of the few states with no income tax. In that case, you simply owe a non-resident return that reports your in-state income, not your total income.)
First issue. As far as I know, there are only 7 states that tax you if you work out of state for an in-state company, and CA is not one of them. Even then, this so-called "convenience of the employer rule" applies to employees and not freelancers. I have never heard that any state can make you file a state tax return if you are self-employed and your permanent residence is in another state. At most, you can be assessed state taxes if you work inside the state for some period of time. For example, suppose you are a freelance graphic designer and have a $10,000 contract with a CA company. If you perform the entire job in your home state, it is not CA income. If it takes you 20 days to do the job, and you spend 4 of those days in CA consulting in person with the client, then at most, 20% of your freelance income from that job is CA-source income.
I believe you are mistaken that simply working out of state for a CA-based company triggers a requirement to file a CA tax return. However, the law may have changed, and I will await the opinion of other experts.
Second issue. If you do need to pay CA tax as a non-resident, then you also need to file an amended return with your home state, to claim the credit and reduce your home state income tax (and get a refund). You could prepare the new CA and the amended home state return by hand. If you want to use Turbotax, the instructions differ on whether or not you previously used Turbotax.
a. If you never used Turbotax,
1. You can purchase Turbotax to install on your computer from a download, look for the link for "Products for previous tax years" at the bottom of this page.
2. Prepare an original return exactly as you filed before, using only your home state.
3. "File" this return by telling Turbotax you will print and mail, then print a copy. This will mark the return as "filed."
4. Reopen the program and choose "Amend" from the things you can do.
5. Amend your file by adding the California return. This should create a new CA return with tax due and an amended home state return with a refund. There should be no changes to your federal return.
6. Print and mail the CA return (with a check) and the amended home state return.
b. If you previously used Turbotax online.
1. Log into your account and download a copy of your tax data file.
2. Download a copy of the amending software for the correct year to your computer. See here, https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-return/amend-change-correct-return-a...
3. Amend your original return by starting on step 4 above.
Third issue. If these returns are more than 3 years old, Turbotax does not support the software and you will have to find a professional or do it by hand. If more than 4 years old, it is past the CA statute of limitations and you may not be required to file.
