Double The Tax Fun – 2 States!
Q. I am having a difficult time trying to figure how much I owe in state tax. I lived and worked in California from 1/1/2009 through 8/7/2009. I began living in Colorado on 8/8/2009 through the end of the year and worked from home for the same company I worked for back in California. State taxes were withheld for each state on the income made while living in each state (California withholding stopped when I moved to Colorado) Do I owe California state income tax on the income I earned while living in Colorado? If so can I get a credit as I was also taxed by Colorado on that income? Thanks!
A. Multi-state tax situations are always so much fun to decipher. Over the last several years of my tax practice, I’ve prepared multi-state returns for Iowa, Missouri, Oklahoma and Montana in conjunction with Arizona. Each state has different laws regarding what income must be counted. However, residency is the most important. In your case, if you have documentation showing that you physically relocated on the date you mentioned, then it becomes much easier to prove that your residency changed. The company you work for is irrelevant to the solution.
California is one of those states with huge budget problems right now. In an audit, they will try to prove that you did not change states completely. Residency involves switching your drivers license, sale of the old home or cancellation of the lease, change of mailing address, car title address changes, voter registration changes etc. If CA is able to prove that you only will be in CO temporarily, then they may determine that you owe CA tax on everything. I don’t know the tax law as well in CA, but they may provide a credit to you for tax paid to CO if it is determined that you actually owe CA tax on everything earned last year. Check with your tax preparer.
Good documentation is key. For this reason, I would visit a licensed tax preparer this year. The complexities of dividing up income and maintaining adequate documentation as well as the right questions to ask to determine your true residency status is worth the price of the professionally prepared return.
No Comments
No comments yet.
RSS feed for comments on this post. TrackBack URI
Leave a comment
You must be logged in to post a comment.