California Tax of Income for Non-Resident

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Bengineer
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California Tax of Income for Non-Resident

Post by Bengineer »

Here's the scenario: Consultant does some work for a California company while living and working in another state. The company is entirely in CA, the consultant does his work remotely, never setting foot in CA.

The CA Franchise Tax Board docs are clear that if the consultant lives in CA and/or the work is done in CA, the income is taxed. I didn't find the scenario above listed in the FTB docs or here.

Has anyone been in exactly this scenario and paid tax, or not? Surely remote work is fairly common these days.

It also seems that both states want their tax and possibly CA will refund the taxes paid to another state.

The scenario seems likely to be spelled out. Perhaps I'm just using the wrong search terms, or missed it wading through the FTB docs. I'm also fairly sure the FTB would tax this scenario, but I'd like to get to where it is spelled out.

Any experience dealing with it and being taxed by CA and another state would be helpful.

Thanks, everyone.
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Duckie
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Re: California Tax of Income for Non-Resident

Post by Duckie »

Bengineer wrote:Consultant does some work for a California company while living and working in another state. The company is entirely in CA, the consultant does his work remotely, never setting foot in CA.
IANAL, but it is my understanding that if you live in another state and never set foot in CA for work purposes during the year you should not be paying CA state income taxes. I guess it depends on the legal definition of "California sourced income". Here is one legal argument: Nonresidents working remotely for California businesses.
  • "But what if the employee is a nonresident who doesn’t have to set foot in California to perform his services? Then the source rule works for the nonresident. Remember, the source of the services is the location where the work is actually performed. A nonresident programmer who monitors and upgrades satellite dish software for a Los Angeles-based media company, all while sitting comfortably in front of his computer in his Austin, Texas condo, doesn’t earn California source income and doesn’t have to pay California income taxes."
When you received your W-2 or 1099 were CA taxes withheld?
Any experience dealing with it and being taxed by CA and another state would be helpful.
If you do have to pay CA taxes you would file as a nonresident and use 540NR. Then when you file your own state taxes you should receive a credit for what you paid CA.
ralph124cf
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Joined: Tue Apr 01, 2014 11:41 am

Re: California Tax of Income for Non-Resident

Post by ralph124cf »

California is grasping and greedy.

They may intimidate a California company into withholding tax that you do not owe. Good luck getting it back.

Ralph
Dilbydog
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Re: California Tax of Income for Non-Resident

Post by Dilbydog »

I had a similar situation, being a NV resident and working for a CA company. While I can’t find the specific code sections, I was able to convince my company that I was not subject to CA withholding. It also helped that I have a relative who works at the Franchise Tax Board who confirmed my understanding.

YMMV, I’m just some person on the Internet and not a tax expert.
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