Question

Working Remotely in Arizona

Forum|Forum|5 years ago
February 10, 2021
1 reply
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I have been working remotely since March. My employer is based in LA. In July I moved out of the room I was renting in LA and relocated to Arizona. I still work for the employer. Do I file returns for CA & Arizona and split my salary based on the time in each state? I did not change my address with my employer although my management knew I was working from Arizona and had moved out of LA - so my W-2 shows I was in CA for all of 2020

T

TomD8

Employee

"Do I file returns for CA & Arizona and split my salary based on the time in each state?"

Yes. You must file a part-year resident return for each of the two states. Your earnings as a CA resident are taxable by CA. Your earnings as an AZ resident are taxable by AZ. You became an AZ resident for tax purposes on the day you began living in your new home in AZ.

My answer assumes that your work after the move to AZ was 100% remote, and that you never physically worked in CA after you moved.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

T

tgauleAuthor

I have not returned to CA as we are still working remotely. May have to move back once we return to the office, but even if that happens it won't be until late 2021 or sometime in 2022. Plan on filing to state returns split by time in each state. Still have CA tags, but assume that is not an income tax issue.

LenaH

There are residency rules that have been changed due to Covid-19, which I think apply to you since you have been working remotely since March 2020. Per the State of California, when determining your filing requirement and residency status for 2020 California personal income tax returns, you should consider circumstances related to COVID-19.

Usually, if you are physically present in California for at least nine months you are presumed to be a resident of California for purposes of the California personal income tax.

However, actions you took related to COVID-19 should be weighed when evaluating whether to file a California resident return. Your actions based on COVID-19 may establish facts and circumstances that support a determination of whether you are in (or out) of California for other than a temporary or transitory purpose.

Please consider the following determining factors which might be relevant:

When the individual entered California
Whether the individual remained in California after the COVID-19 period (and if so, how long)
Whether the individual remained in California throughout the COVID-19 period
Whether the individual provided COVID-19-related services in California
Whether the individual cared for an at-risk family member or friend

From the information given, you stated that you planned to go back to California once the office reopens. It sounds like this is a transitionary move due to Covid-19. In that case, you would still have to file a resident California return with all the income being allocated to California.

The other factor to this is whether or not you paid Arizona state income tax. You would then have to file a nonresident return if so. Otherwise, it is not an Arizona source income because you would not have telecommuted from Arizona if Covid-19 did not occur.

If my assumptions are incorrect, then yes, you would file part-year resident returns for both states.

@tgaule

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