Filing two states

[terimac4]

We moved to North Carolina in January of 21 but I worked remotely for a california school until June. I then made income working for North Carolina from August to December. How do I claim my residential status? NC is saying I underpaid my taxes by $1500 when the majority of my income was made in California. (I was only virtual due to COVID-not official remote employee) Does the dates I put in for being in NC affect my CA income?

[DanielV01]

Your question states that you moved to North Carolina in January of 21.  If your facts meet the NC State definition of residency beginning at that point, then all of your income from the point of that date is taxed by North Carolina regardless of where it was made.  On the flip side, any California withholdings from that same period should be fully refunded to you:  California does not tax employees working remotely from out-of-state on behalf of a California-located employer.  

If you still hadn't officially "moved" by state statute, you may be able to claim that your part-year residency in North Carolina began later in the year and you were still CA residents until that time.  In that situation, CA taxes the income you made prior to your move, because the resident state is allowed to tax all of your income no matter where it was made.

The circumstances you state strongly suggest you should use the first treatment, but we don't have all of your facts and circumstances.  You do.  And this can mix with state statutes on what constitutes "residency" for tax purposes:  something that varies from state to state.  But this much is certain:  you were a California resident until you became a North Carolina resident.  What date was that?  Claim the correct date as provided in the residency laws of North Carolina.

[terimac4]

Thank you for your response. We bought a house in NC in Jan and I was here for a bit working, but I was not remote on behalf of my employer. I was just virtual and as we were moving here, I was back and forth a bit for the first 5 months. We sold our CA house on Dec 31 of 2020, but I did have a CA address as I was staying with my friend if I came to CA (which was about 2 weeks)

[DanielV01]

Purchasing a house is usually considered establishing residency.  If those are your facts, it is much safer to say that you are a North Carolina resident, and you probably can claim such for the entire year based on the sales date of the CA home.  That would make any California income nonresident income (which, you would be filing a California Nonresident return anyways with your situation).  What you will need to determine is how much of your California income was earned physically working in California.  Whatever that figure was will determine your California tax.  Whatever California taxes the California income may be claimed as a credit towards North Carolina state tax.  North Carolina will tax all of your income regardless of where it was made.

This would be the easiest and safest way to file based on the facts provided.  Having a place to stay in CA while working there does not make you a resident there.  This is supported by your home sale.  It may or may not result in more overall tax, but you will have less complications in preparing or substantiating the returns if need be.