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Where do I file my tax returns? California non-resident and resident taxes

California Non-Resident Taxes

The California Revenue and Taxation Code requires California residents and entities that makes payment/employ California non-residents and entities for services performed in California to withhold California income tax. Under the Code, non-residents must pay California income tax on all income from California sources for personal services. Source is the place where the services are provided. Entities include business entities that don’t have a place of business in California, non-resident trusts and estates. If you are a non-resident partner in a partnership that receives some income in California, then you will be taxed to the extent of your share from the income that the partnership received from California. Income includes wages, fees, salaries, business income, income or rent from property including real estate, vehicles, machinery, etc. that are located in California.

Filing an income tax return in two or more states

Sometimes you may have to file state income tax returns in two states — your state of residence as well as the state where you have provided your personal services. Income that you’ve received from activities in California will be subject to California state taxes. Under California Law, any person who lives in California for all or part of the year must file California income tax returns. If you have paid state income tax in another state on the income that you earned from activities in California, you can qualify for a tax credit. If you have mailed your tax returns, you will receive the refund within 8 weeks. If you have filed your return online, you will receive the refund within 2 weeks. You may also have to file in two states if:

  • If you have lived in more than one state during the year
  • If you lived in one state and worked in another.
  • If you own income generating property in another state

Resident and Non Resident

Generally speaking, a resident is someone who has his or her main home in that state whereas a non-resident is someone who did not live in the state at any time during the tax year but received income from the state. The income may be for work performed in the state or income received from any property, estate or trust located in the state.

California Resident

Under the California Revenue and Taxation Code, a person is a California resident if he or she is in California for any purpose besides transitory or temporary purpose. Any individual who is residing in California but absent for transitory or temporary purpose is also considered a resident. You will be considered a California resident if you come to California for a purpose that extends over an indefinite or long period of time. You will however be considered a non-resident if you come to California to perform a specific contract of a short duration. A business entity not qualified to transact intrastate business will be considered as California resident if it has a permanent office in the state and the office is permanently staffed by employees.

Forms

Each state has its own income tax return forms. You should file the correct forms. In California, non-residents must file their returns on Form 540NR.

The Form 540NR has 2 types:

Non-California Resident or Part-Year Resident Income Tax Return

Non-California Resident or Part-Year Resident Income Tax Return

 

Tax Credit

You can qualify for a tax credit in your home state if you have paid tax in another state on the income you earned from an activity in that state.

Form 590

A California resident who makes payment to a non-resident for services provided in California must complete Form 590 if the non-resident is seeking exemption from withholding. The completed Form 590 must be submitted to the withholding agent. Once the withholding agent receives the completed Form 590, the agent is relieved of the withholding responsibility.


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