How can I avoid double taxation as income during resident status is added by turbo tax to the total income for state tax calculation?

[sarathmn]

I worked in CA till Apr 15 2018 and started working in PA next day onwards. But I moved my resident status to PA only on May 1st. PA state tax was deducted from my paycheck for the period Apr 16th - Apr 30th. No tax was deducted for CA in this period. But my W2 shows Apr 16th - Apr 30th income also as a CA income in a separate entry. When enquired, I was told that it is shown since I was a resident of CA in that period. In turbo tax, this was added to my CA income for state tax calculation. How can I avoid the double taxation? Where can I mention that this doesn't below to CA?

[DanielV01 · Accepted solution]

Residency is determined by facts and circumstances.  For simplicity and tax preparation sake, you became a PA resident when you no longer worked in CA.  You may have had to physically move your things, register your vehicle, and so forth, but for tax purposes you became a PA resident on April 16 when you left CA to PA for work.  

To say that that income does not belong to CA, state that your move date out of CA was April 15, and your move date into PA is April 16.  This way CA taxes CA income only, and PA taxes PA income only.  You file part-year resident returns for both states, and you do not have to claim a credit for taxes paid to the other state on either return.

Even when you do this, though, keep in mind that CA factors in all of your income when determining CA tax.  On the return, CA will pretend that all of your income was taxable in CA, and then prorate the amount of tax to the amount of income reported to CA.  But other income not earned in CA will not be taxed in CA.

[sarathmn]

Thanks for the explanation. The problem I am facing is I have two separate sections in my W2 for CA income. One for until Apr 15th and another for Apr 16th - Apr 30th ( I was not taxed in CA though for this period). But turbotax added up these two incomes and is calculating the tax. Where is the option in turbotax where I can make adjustments to exclude the Apr 16th - Apr 30th income from CA taxable income? OR should I consider that as CA income and make adjustments in PA income (since PA already taxed me) to get the refund?

[DanielV01]

In the PA return you will see a screen that says "Confirm these amounts".  You will need to edit that W2 and check the box next to the CA line to "remove these wages" so that the CA amount is not taxed in PA.  Programming adds both of those lines together because it is what PA requires, but you can make this adjustment.  In the CA return, if you cannot adjust, allocate, or apportion out the amount (I believe you can), then you will have to claim a credit against it for the amount that PA taxes that portion of the income.  That would be a bit of extra work, but if you can't get the income out of the CA return, it's what you would have to do.