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I received a 1099 from a CA company and live in AZ, do I have to file a CA tax return?

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June 5, 2019
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I do financial consulting for a CA company remotely and live in AZ. The CA issues me a 1099. I do not make any consulting income in AZ. Do I have to file an AZ return for the CA income? Or do I have to file a CA return and file no return in AZ?

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Best answer by DanielV01

It depends. For California, you are currently not taxed on income as a nonresident unless you physically work there. It is important to know that there are states that consider income of remote workers or telecommuters to be income earned in their state and taxable there (NY is most notorious for this). However, California still does not officially have this law.

So unless you were physically working inside of California, your income is not taxable there. It is taxable in Arizona. All of your income is taxable in your resident state. (If the income were in fact taxable in California, you would file a CA Nonresident return, and an Arizona resident return. Arizona would give you a credit for the taxes you pay in California on that income.)

DanielV01Answer

Employee

It depends. For California, you are currently not taxed on income as a nonresident unless you physically work there. It is important to know that there are states that consider income of remote workers or telecommuters to be income earned in their state and taxable there (NY is most notorious for this). However, California still does not officially have this law.

So unless you were physically working inside of California, your income is not taxable there. It is taxable in Arizona. All of your income is taxable in your resident state. (If the income were in fact taxable in California, you would file a CA Nonresident return, and an Arizona resident return. Arizona would give you a credit for the taxes you pay in California on that income.)

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T

Tsukaska

You are considered a nonresident of CA if you didn't live there. According to CA FTB publication 1031, you are supposed to file a return there if you had CA-source income. The CA 540NR booklet (and the previously mentioned publication) gives guidelines for if you have to file. There is a gross income test (all income sources, not just CA), adjusted gross income test, children with investment income test, and an "other situations when you must file" section. It does not state anything about being physically present.

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Tsukaska

It is dependent on factors listed below. You are considered a nonresident of CA if you didn't live there. According to CA FTB publication 1031, you are supposed to file a return there if you had CA-source income. As a nonresident, the CA 540NR booklet (and the previously mentioned publication) gives guidelines for if you have to file. There is a gross income test (all income sources, not just CA), adjusted gross income test, children with investment income test, and an "other situations when you must file" section. It does not state anything about being physically present, as another had mentioned. Ftb.ca.gov/forms/2018/18-540nr-booklet.html

DaveF1006

if you performed your consulting work strictly in Arizona you do not report this income as California income. it is Arizona income however since you performed your work in Arizona.

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Tsukaska

The source of income was stated as coming from California. Thus, it is California source income. Period. I don't necessarily agree that California should tax the world like it feels it has the ability to, but if you read the actual literature and not stick to biased opinions, you should also file a CA return.

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StratigosA08

You are correct. Most likely, a California return will need to be filed. To the extent you are not able to allocate the income to Arizona (in other words you have to report it to CA and AZ), you should make sure you claim a credit against your Arizona tax for the tax you pay to CA.