Really need your helps to clarify part-time resident and how Turbo tax handle it

[bi2nh]

I have been using Turbo Tax for 10 years now. This year I am a bit confused how Turbo Tax can handle my situation. I really appreciate if you could help reviewing my situation and let me know what I should do and whether Turbo Tax can handle it.

So my timeline:

01/01/2022 - 03/01/2022: I am still a California resident

03/01/2022 - now: I moved to Texas and became an Texas resident (bought a house in Texas and already sold the home in California before the move). Applied for Texas driver license and registered my car with Texas

01/01/2022 - 06/01/2022: Still work with the same company in California due to remote policy. Company did apply for a Texas tax id when I notified them of the move and switch my tax profile to Texas in 04/01/2022 so I no longer have any of my tax withhold by California since 04/01/2022. Technically I should be moved to the Texas tax profile since 3/1/2022 but employer needs some time to set up new tax profile in the new state.

06/01/2022 - now: Got a new remote job. Employee is based from Tennessee. They also set my tax account to be based from Texas so I don't have any connection to Tennessee.

I work remotely from Texas since 03/01/2022 till now

So my question would be :

1. Is TurboTax smart enough to pro-rate my last job so I only pay tax to California for the time I worked in California (1/1 - 3/1) and don't own any tax to California from 3/1 onward ? 
2. Also how does Turbo Tax handle the 2nd W2 from my new job ? My new job has zero attachment to California. Can Turbotax exclude that W2 from California ? Is there an option to tell Turbo Tax that that W2 has nothing to do with California ?

Thank you so much for your helps. I really want to use Turbo Tax if possible so appreciate if you could help me find a clear path forward !

[tagteam · Accepted solution]

Texas does not impose an individual income tax, so you only need to be concerned with a part-year return state return for California, which TurboTax can handle.

[Hal_Al]

Q. Is TurboTax (TT) smart enough to pro-rate my last job so I only pay tax to California for the time I worked in California (1/1 - 3/1) and don't own any tax to California from 3/1 onward ?  Is there an option to tell Turbo Tax that that the TN W2 has nothing to do with California ?

A. Yes.  But, you have to follow the TurboTax interview carefully. 

One possible problem is your 1st employer misidentifying some income (e.g. Apr 1-30) on your W-2 as CA income. But, there is a work around in TT. Don't worry about it now.  You can get help in this forum, next tax season. 

[bi2nh]

Thank you for responding. My question is when I enter W2 for the new job, will there be an option in Turbo Tax to exclude that W2 from California since it has nothing to do with California. The employer is not in California and at the time of taking the job I already became a Texas resident.

Also how does Turbo Tax pro-rate the 1st W2 when the state resident switch is taking place ?

Thank you !

[Hal_Al · Accepted solution]

Q. When I enter W2 for the new job, will there be an option in Turbo Tax to exclude that W2 from California.

A.  Not exactly. When TT does not see "CA" in box 15 of the W-2, it will not treat the box 1 amount as CA income (in your  situation, TX & TN), boxes 15-20 of the W-2 should be blank.  Later, in the CA interview, you will be asked to allocate income as CA or not CA.

Q. How does Turbo Tax pro-rate the 1st W2 when the state resident switch is taking place ?

A. By the state abbreviation(s) in box 15 of the W-2 and the amount in box 16 on each line. Ideally your employer shows CA for only the Jan 1 -Mar 31 amount.  Otherwise, you may have to make adjustments when you enter the W-2 or at the income allocation screens.

Reference: https://turbotax.intuit.com/tax-tips/state-taxes/multiple-states-figuring-whats-owed-when-you-live-a...

[bi2nh]

Thank you so much for the detailed response. Looks like I found a clear path forward based on your answer. Will take extra caution when filling out this year but looks like my questions have been answered.

I really appreciate your helps ! Looking forward to using TurboTax again this year !

[rakumarji]

Hello,

I have the similar situation and need clarification on your 2nd point 'Otherwise, you may have to make adjustments when you enter the W-2 or at the income allocation screens.'.

My situation: I moved in WA from my remote work location in CA on 01JAN22 and submitted paperwork to change my tax prodile/address, but payroll took 4 weeks to update it. Now, on W2 deducted CA tax for 4 weeks. It shows 'state wages' amount (box 16) and state income tax (box 17) for that period of 4 weeks.  Now, question is how to get this CA state tax back as technically I moved to WA on 01/01/22.

1. TurboTax shows for state, the income earned in CA (box 16) as 'allocate income' and state tax deducted (box 17). But I need to claim this state tax back as technically I was not in CA for those 4 weeks? How do I do this adjustment?

2. If I make 'allocate income' for CA as 0.00, then it returns me all CA state income tax deducted. This is what I want and is correct technically. But, is this correct way to do this adjustment? as box 16 and box 17 will not match with W2 with IRS and may trigger AUDIT? Please clearify this as well.

Pls suggest me how to handle this situation?

Thanks in advance,

Ravi  

[LindaS5247]

You need to enter your Forms W-2 as they are. Answer all follow-up TurboTax prompts that you get when you to enter your W-2 income.

Do not change the amounts on your W-2 when entering it . Let the program account for it.  Unless you feel that your W-2 amounts are actually incorrect, then get a corrected one from your employer.

You will be filing two state returns one for California (Non Resident) and one for Washington (Resident).

When entering your state tax returns, when multiple states are involved, you should enter your nonresidential state tax return first (CA).

Then enter your residential state tax return (WA).

It is recommended to prepare the nonresident state first, because your resident state will provide you a credit for the tax you pay to the nonresident state.  By preparing the nonresident state first, TurboTax can transfer the credit information to your resident state to return. 

Turbo tax will take the information from you W-2 and your State returns and if you have had too much taken out for CA you will get a refund on that state return.

Click here for additional information on filing multiple state returns.

Click here for information regarding filing multiple states returns.

Click here for how to delete your state return in TurboTax desktop.

Click here for how to delete your state tax return in TurboTax Online

[rakumarji]

HI,

Thank a lot for your quick reply and help on my question. Really appreciate it.

update: my employer says, it take 2-4 weeks to update tax profile in payroll and they will not send a corrected W2. 

So, last question to clarify:

#1: as I explained in #1 above. In TurbTax, I need to enter 'California sourced income' as 0  on allocation screen(even though box 16 on W2 has amount) and I will get my CA tax back. I will enter this as Non-Resident California state return.  Pls clarify this.

#2: The 'California sourced income' may not match with W2 detail (box 16) with state/FTB sent by employer., but it may not trigger audit from california/state as I am resident of WA (I have WA address on W2). In case they ask any documentation, I may provide my apartment lease (starting from 01/01/22) etc.

Pls clarify this as well.

Please clarify both of my question #1 and #2.

Thank you so much once again.

Ravi

[bi2nh]

Update to my tax situation, my CA company refused to correct the tax residency with CA and I ended up have to report the entire income while working remotely from TX as CA resident.

The issue is that if your company doesn't cooperate, the CA FTB already got a report of how much income you are subjected to CA tax so you can't get away with just adjusting the number on TurboTax, that will trigger a tax audit event and will be even messier.

Treat the extra tax money you paid to CA as extortion money or exit tax and move on. Don't waste your time fighting with these legal criminals. They have nothing to lose while you have everything to lose. Pay the tax and move on with your life.

[TeresaM]

When you enter in TurboTax that you lived in Washington the entire year and then open up the California state return, you will want to be sure it says that it is a Non-Resident Return.  This will file on Form 540NR.  I have examples of the screens below but of course you will enter them with the answers that are correct for your situation. 

After you answer these questions it is entirely likely that the California Franchise Board will have the information it needs for the refund of your erroneous withholding in 2022.  If they do have a question, they will respond in writing and specifically ask for exactly what documentation they need. People move in and out of California and they are accustomed to dealing with their tax forms. This is a straightforward case because you were in Washington the entire year. Sometimes people move in the middle of the year and the income has to be allocated between states.

[rakumarji]

Thanks you all very much. Really appreciate your input on this topic.

I am all set for my tax now.

Thanks again.

Ravi