filing CA state tax for income earned outside the state

Forum|Forum|2 years ago
April 4, 2024
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I am a full-time resident in California, but also have income earned outside of California.

I read that California still taxes all income (regardless of where it was earned) but then provides a tax credit for the non-CA income ( https://turbotax.intuit.com/tax-tips/state-taxes/multiple-states-figuring-whats-owed-when-you-live-and-work-in-more-than-one-state/L79OKm3jI#GoTo-How-do-I-know-how-much-I-owe-in-each-state- )

How do I report what is and isn't CA income? Do I still use the 540NR form even though I was a full-time resident ? It's the only form I see that allows for allocating income from different states.

MonikaK1

First, prepare your Federal return; then, prepare a nonresident return for the other state where you had income (if that state has an income tax) on which you would only identify the income from that state as taxable there. Then, prepare the California return. Use the Resident Form 540.

Where prompted in TurboTax, indicate that you earned money in another state. To get the credit for tax paid to another state (based on the nonresident return you prepared), in the California interview, at the screen for Credits and Other Taxes, select Start next to Other State Tax Credit and answer the questions.

There are a few exceptions. California residents can't claim the credit If the other state is Arizona, that is an exception. Arizona doesn't tax California residents on items that California will tax. Also, the District of Columbia, Guam, Oregon, and Virginia are exceptions unless you are a dual resident of both jurisdictions.

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Opus 17

Employee

You file a normal California resident return to report and pay income tax on all your world-wide income, no matter where it was earned.

If you have income that is “sourced” to another state, you may need to file a non-resident return for that state. In most cases, the source of income is where you were physically living or performing the work, not where the company was headquartered. So working for an Ohio company is not Ohio income unless you were actually living or working in Ohio at the time.

In TurboTax, prepare the no -resident state returns first. That information will flow to the California return to calculate the offsetting credit.

dmlcrown

I am a CA resident, but earned 1099-NEC income in 2024 while working physically in IL. How do I report the income from IL in TT? IL State return required? Schedule C required?, Only CA State return with credit for tax to IL? Do I have to file a non-resident return in IL?

MonikaK1

According to this Illinois webpage:

As a nonresident, you must file Form IL-1040 and Schedule NR if
- you earned enough taxable income from Illinois sources to have a tax liability ( i.e., your Illinois base income from Schedule NR, Step 5, Line 46, is greater than your Illinois exemption allowance on Schedule NR, Step 5, Line 50), or
- you want a refund of any Illinois Income Tax withheld in error. You must attach a letter of explanation from your employer.

After completing the Federal return, prepare a nonresident Illinois return if needed under these requirements. Follow the instructions in TurboTax. Note the amount of your tax liability for Illinois. Then, prepare your California resident return. California allows a credit for the amount of tax paid to another state.

See this help article for more information about filing if you have income from multiple states.

@dmlcrown

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