Do I have to pay California state taxes if I work remotely in China?

[ruby25zgheng]

I worked for a CA company in 2023 and lived in CA from Jan to May but moved and stayed in China from June to Dec later. I worked remoted from June to Dec of 2023.

I do not know what is my residency status for 2023? Do I need to pay the CA tax as a whole year of 2023 or just need to pay partial tax? Wish some expert could help me to figure out, thank you very much!

[pk]

@ruby25zgheng ,  Should I assume that you are a US person ( citizen / GreenCard ) ?

Generally CA  taxes  both Non-Resident ( on California sourced income ) and Residents ( on world income).

Unlike some other states  CA does not use a number of days present  to determine residency -- instead it uses  a number of factors to determine of one is resident ( domiciled ) ---- I would refer you to  FTB instructions/discussions  -- see page 5 of  this --->

2023 FTB Publication 1031 Guidelines for Determining Resident Status

If I assume that you were never a CA resident and just came to the US / CA  and stayed here from Jan through May of 2023 , worked / trained  . and then went back to your home country ( China ) then your period of stay may qualify you for being a Non-Resident.  This would mean that you will pay CA taxes ONKLY for the period that you lived and worked in CA.

There is also a possibility that you were a resident of CA and then took a job abroad, then  you are a resident for the first part of the year and then a Non-Resident for the rest of the year  -- the  referred document also covers this case.

Is there more I can do for you ?

[ruby25zgheng]

Thanks for your reply. We were CA residents and moved out in 2023. My concern is will his foreign earned income be split into half and counted on me? For example, he earned 100K outside of US in 2023 and he should not pay CA tax since he is non-resident and income source is not from CA. However, we filed married joint, I am a 5 months part-year resident in CA, then do I need to pay tax for half of his foreign income and times 5/12 months?

I am not clear about this part.

[pk]

@ruby25zgheng  , please could you tell me little bit more -----

(a) did your husband ( spouse ) live and work in CA at anytime in 2023 / 2022 ?

(b)  Is he a US person ( citizen/ GreenCard ) ?

(c) Are you US person ( Citizen/ GreenCard ) ?  Was this  Jan-May of 2023 your only stay in the USA ? California or were you a resident of California or another  US state  earlier  ?

(d)  Do you have assets / house / property , bank accounts / driver's license  etc. in California ?

What I am trying to get at is " closer connection" and/ or your intent for future  -- yes ?

I will come back once I hear from you 

[ruby25zgheng]

(a) did your husband ( spouse ) live and work in CA at anytime in 2023 / 2022 ? 

Yes, he worked and stayed in CA for the first two weeks of Jan of 2023 and quit the job and found a new one

outside of US and moved and till now, we all stayed outside of US, and he is still working for the foreign company, we rent the apartment here for more than a year already.

(b)  Is he a US person ( citizen/ GreenCard ) ?

Yes, he is the green card holder.

(c) Are you US person ( Citizen/ GreenCard ) ?  Was this  Jan-May of 2023 your only stay in the USA ? California or were you a resident of California or another  US state  earlier  ?

Yes, I am a citizen. I worked for CA company and since he moved out, I moved out in June of 2023 later but still worked for the same company since my boss is nice and he agreed me to work remotely till June of 2024; I am done with the company in June of 2024.

(d)  Do you have assets / house / property , bank accounts / driver's license  etc. in California ?

We both lived in CA for several years until he found a new job and all of us leaving CA. We do not have a house/asset in CA but have the bank and drive license in CA.

Thanks for your patient and help!

[pk]

@ruby25zgheng  Ni Hao!   ( one of the two Chinese words I know ).

 Based on your response  what I get is  as follows :

1. you are both  US persons  and therefore  US will tax you on world income .

2.  you are each eligible  for Foreign Earned Income exclusion ( FEIE ) using form 2555.

3. your husband  was / is a California Resident but for 2023  he will need to file as  Non-Resident- Part-year Resident -- form540-NR ---- and  -->

" Part-year resident

If you lived inside or outside of California during the tax year, you may be a part-year resident.

As a part-year resident, you pay tax on:

• All worldwide income received while a California resident
• Income from California sources while you were a nonresident"\

4. The same rules apply to both of you  ---  you file California  showing :

         (a)  Husband's   world income till he left California and moved to China and  ONLY California income after  first full day in China.

         (b)  Your world income till the day you left California and moved to China and ONLY California  income after  first full day in China.

        (c) Note that while you worked   for the California  entity while residing in China ( Tax Home China ) is NOT California income --  it is Foreign ( China sourced ) income and not taxed by California.

5.  Community Property rules  ( i.e.   each spouse  counts 1/2 of total family income as his/her own for tax purposes ) apply while  one is a resident of a community property state.  Your husband  became a non-resident of CA once he left the state  permanently (  actually for   job abroad) and domiciled  in China.   Same applies to you.

6.  The fact that you have CA driver's license and bank accounts  just says that you have some connection to California but you are still a Non-Resident of California.

In closing, I am sorry it took such a longtime and so many interactions to answer fully your question  but I wanted to be sure that  my logic will stand. 

BTW -- while preparing your return consider  a copy of form 540-NR handy   ( download from  -->  2022 Form 540NR California Nonresident or Part-Year Resident Income Tax Return Form  ) -- this will help in guiding as to what you are filling out.

XieXie

Is there more I can do for you ? 

pk

[ruby25zgheng]

Hi pk,

Thanks for your information!

Let's make it simple: I only need to pay the CA tax for the days I stayed/worked in US in Jan 2023; the income I earned in China will not be taxed at all for CA; for my wife, she only needs to pay the CA tax for the days she stayed/worked in US of 2023(from Jan to June); she does not need to pay the tax which I earned in China even if we filed the married join since I earned that part not her; I am filed as non-resident and she filed as part-time resident, right?

Thank you again!

[pk]

@ruby25zgheng   that is correct --- note though  that the same form 540-NR covers both  Non-Resident  and Part-Year Resident with California Sourced income.     Also during the period the Part-Year Resident  is a Resident, he/she is taxed on world income.

Is there more I can do for you ?

pk