Moved from CA to OR last year and RSU vesting tax

[shachiagarwalla]

I moved from CA to OR last year and there was an RSU vest after the move. On my W2 the vest has been taxed as OR income. But I think it should be taxed as CA income (with allocated ratio of (time in CA/total time between grant and vest)) since it was granted during my time in CA. How do I request a tax credit from OR and then pay tax in CA for this using TurboTax?

https://www.ftb.ca.gov/forms/misc/1004.html

[DavidD66]

You need to include the income on your California tax return.  It is also taxable by Oregon.  TurboTax will calculate a tax credit on your Oregon tax return for the tax paid to California while an Oregon resident.

[shachiagarwalla]

Thanks!!

Which section do I enter the income in CA state return in Turbotax?

[shachiagarwalla]

@DavidD66 

I calculated the CA part of the RSU vest income (allocation date ratio) and added it to my CA income part. I did not submit the return then. 

I then started my OR tax return and it asked me to enter total CA income and tax to calculate the credit. But I do not know the CA tax until I submit my CA return. Am I doing something wrong here? 

[DavidD66]

You can determine what your California tax is before you e-file your return. You will need to pay for TurboTax and then you will be able to print (create a pdf of) your entire return or specific forms/schedules prior to filing.  You will still be able to make changes prior to filing. Follow these steps to print a preliminary copy of our return in TuboTax Online:

While logged in and working on your return:

• Click on Tax Tools
• From the drop down menu click on Print Center
• Click on Print, save or preview this year's return
• On the next screen click on "Pay Now" 
• You may be prompted to "Go to My Info" if you need to add additional information
• Submit your payment information and you will be able to print your tax returns

 Note, you must pay by credit card in order print or preview your preliminary return.  You will not be able to pay using your federal tax return.

[blatsnorf]

@DavidD66  Oregon and California have an arrangement on this, so OR does NOT give a credit for taxes paid to CA.  Instead, CA is supposed to give a credit because I also paid to OR.

[blatsnorf]

@DavidD66 -- I'm not following what your second response has to do with my questions.

[GeorgeM777]

You are correct.  An Oregon resident is allowed a credit for taxes paid to another state on mutually taxed income if the other state does not allow the credit. 

The Oregon Secretary of State's website provides the following example which illustrates this point:

Example 2: Elizabeth, an Oregon resident, receives income from California property. Because California allows Oregon residents to claim a credit for mutually taxed income on the California nonresident return, Elizabeth is not allowed to claim the credit on the Oregon resident return.

Oregon Department of Revenue

@blatsnorf

[blatsnorf]

@GeorgeM777 Yes, that _is_ my situation.  However, it seems like I'm either entering the wrong data into TurboTax or TurboTax is doing the wrong calculation for my CA return.  For privacy, I'm just going to use fabricated numbers.

Let's say that the total fair market value (taxable income)  from the RSUs was $100K.  Let's further say that my employer calculated that 70% of the tax went to CA and 30% to OR.  So CA was paid $7490 which is 10.7% (tax rate) of 70% ($70k) and OR was paid $2400 which is 8% (tax rate) of 30% ($30k).

Now it comes time to file taxes.  CA top marginal rate comes back as 9.3%.  OR top marginal rate comes back as 9.9%.  OR expects to be paid 100% of the taxes owed on the full $100k and for me to file for a credit with CA.

* The $7490 sent to CA was already too much as it was paid at 10.7% instead of 9.3%

* OR is reporting a large underpayment of taxes because they calculate a little over $9K in taxes owed on the RSU income and only $2400 was paid.

Back to the two problems I'm asking about:

Q1:  OR is asking for another ~$5700, but TurboTax is calculating that the CA refund only goes up by $3762, not $5700.  And...  $7490 in taxes was sent to CA just for the RSUs.  So these are differences of $1938 and $3728 respectively.  Why am I not getting all of that back from CA when OR is taxing me at a higher rate than CA?

Q2:  Oregon and TurboTax are both saying I'm going to have to make estimated tax payments for next year.  I'm going to be in the same place where the tax payments are being made, but they're being made to CA and OR doesn't see them.  Is there any way to balance this out so that I'm not effectively paying the tax twice and then getting (a partial) refund of part of it from CA?

[GeorgeM777]

Question 1 – It could be that the CA tax is the correct amount and thus no additional refund amount is due, or the allocation ratio is wrong and needs to be changed.  If you were a CA resident on the grant date but not the vesting date, CA will apply the appropriate allocation ratio to your RSUs to determine the amount of tax to assess. 

To determine the allocation ratio, calculate the days spent in CA between the grant date and the vesting date.  Divide the resulting number by the total number of workdays between the grant date and the vesting date.  Exclude vacation/holidays and weekends and include the end date.

Once you know your Allocation Ratio, multiply your total RSU income from the vest date by your Allocation Ratio. 

Question 2 – Calculating what you may owe to CA and OR with absolute certainty may not be possible.   The 2023 tax rates and tables for CA are not yet available.  More about paying CA estimated taxes can be found at the following link:

California Estimated Tax Payments

@blatsnorf