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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3908
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Question regarding California state taxes. If I own zero property

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Question regarding California state taxes. If I own zero property in California and my primary residence is in another state, as far as I know, I don't pay any CA state taxes even if I work remotely for a CA corporation. I need to clarify that statement - I am a 1099 contractor. I am self employed but a CA corporation pays me as 1099. I am a loan officer. The properties that I will remotely originate mortgages on will be CA properties but I don't think any of this would make me a CA resident for tax purposes? Is my understanding correct?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor : you're right that you would not be a resident ....
NPVAdvisor : Let me look up the regs for you.
NPVAdvisor : and (please don't shoot the messenger here), but I believe that because the income is what's called effectively connected (to CA) income, you'll have to file a NON-resident income tax form a pay CA tax on THAT income
NPVAdvisor : Just a second, if youn would ...
Customer: Thanks. Another question: exactly the same scenario but instead of being a contractor I am working remotely as a loan officer as a W2 employee. Would that change anything?
NPVAdvisor : probably not
NPVAdvisor : it comes down to it being CALIFORNIA SOURCE income
Customer: So you are pretty sure about that?
NPVAdvisor : giv me just a sec and I'll dull dow th CAL fr tx board definitions
NPVAdvisor : yes, but pleas hang on and I can get the actual docuentation for yu
NPVAdvisor : you may NOT have to sinc you're not IN CA
NPVAdvisor : juuust a sec
Customer: OK.I'll wait
NPVAdvisor : If you are a nonresidentYou have both of the following:California source income.Income from all sources that is more than the amount defined in this chart.You must file a California income tax return.540NR Tax Booklet
NPVAdvisor : Sorry formatting was terrible take a minute and look at this:
NPVAdvisor : But hang with me
Customer: i'm here
NPVAdvisor : we still need t pin down "source" income definition
NPVAdvisor : https://www.ftb.ca.gov/individuals/fileRtn/
NPVAdvisor : Be looking at the under the non-resident part while I look up their source income definition
Customer: can you help me interpret it. Do you think I'd have to pay CA taxes then?
Customer: if you don't mind - as the professional - interpreting all this and giving me your opinion I'd be grateful
NPVAdvisor : One more thing this is the critical piece:
NPVAdvisor : CompensationWages and salaries have a source where the services are performed. The source of this income is not affected by either of the following:The location of the employer where the payment is issuedYour location when you receive paymentResidents - Include all wages and salaries earned while a resident, regardless of where the services were performed.Nonresidents - Include the income for services performed in California.Back to topBusiness incomeA nonresident’s income from California sources includes income from a business, trade, or profession carried on in California. If the nonresident’s business, trade, or profession is carried on both within and outside California and the part outside California is separate and distinct from the part within California, only income from the part conducted within California is California source income.
NPVAdvisor : I will
NPVAdvisor : so... for compensation (W-2 income)
NPVAdvisor : CompensationWages and salaries have a source where the services are performed
NPVAdvisor : The source of this income is not affected by either of the following:The location of the employer where the payment is issuedYour location when you receive payment
NPVAdvisor : SO THIS says that you might want to consider W-2 income if you have a choice.... now lets look at the business income definition of "source"\
NPVAdvisor : FOr BUSINESS (1099) income
NPVAdvisor : A nonresident’s income from California sources includes income from a business, trade, or profession carried on in California
NPVAdvisor : Further ...
NPVAdvisor : If the nonresident’s business, trade, or profession is carried on both within and outside California and the part outside California is separate and distinct from the part within California, only income from the part conducted within California is California source income.
NPVAdvisor : so
Customer: i'm still here
NPVAdvisor : if it's employee income, and you're not DOING the work IN California, then it's not CA source income
NPVAdvisor : If it's business income, you'll have to pay tax on the California portion
Customer: Great.What about 1099?
NPVAdvisor : that's business income
NPVAdvisor : Are you physuically locaed in CA at all (as a resident)?
NPVAdvisor : .
NPVAdvisor : Again, directly from the (on salary and wages)
NPVAdvisor : Wages and salaries have a source where the services are performed. The source of this income is not affected by either of the following:The location of the employer where the payment is issuedYour location when you receive payment
NPVAdvisor : .
Customer: No.
NPVAdvisor : But for 1099 (Business income)
NPVAdvisor : OK
NPVAdvisor : A nonresident’s income from California sources includes income from a business, trade, or profession carried on in California. If the nonresident’s business, trade, or profession is carried on both within and outside California and the part outside California is separate and distinct from the part within California, only income from the part conducted within California is California source income.
NPVAdvisor : SO
NPVAdvisor : if its w-2, and you're not located there at all you're completely clear
NPVAdvisor : However,
NPVAdvisor : If it's 1099 income,
NPVAdvisor : If the nonresident’s business, trade, or profession is carried on both within and outside California and the part outside California is separate and distinct from the part within California, only income from the part conducted within California is California source income.
NPVAdvisor : If you can effect it W-2 is MUCH cleaner (esecially when the company's in CA)
Customer: I don't live in CA and never step foot there. The corporation who I am contracted with is located in CA and my clients (and the houses I help them refinance) are all in CA.
NPVAdvisor : I understand
NPVAdvisor : you can make a case under either ... but they state it unequivocally for employee income ... the fact the homes and the company are in CA will allow THEM to make a case that you're "doing business in California"
NPVAdvisor : THat's why I said, that W-2 is much cleaner ... no doubt
NPVAdvisor : By doing busines with a compan in CA and dlients in CA you are doing business in CA
NPVAdvisor : they will say "affecting commerce in CA"
NPVAdvisor : You can still use form 2106 (unreimbursed employee expenses) to deduct anything the CA company wont reimburse
Customer: OK. thanks
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3908
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 5 other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.

Thanks so much, Harold.

Do take a look at this, If you MUST take the income as 1099, you'll have to make the case that you're not doing business in CA.

https://www.ftb.ca.gov/individuals/fileRtn/index.shtml


If you'd like to use ME again, just say, "For Lane only," at the beginning of your question.

Thanks again,
Lane
Customer: replied 1 year ago.
I will thanks. Just curious - how di you know my name? I thought only my user name would come up?
Expert:  Lane replied 1 year ago.

We have a box on our screen that sometimes has a first =name and sometimes says no name provided.

Yours says Harold ... maybe you put it in when you fist joined?

I can find out if you Like ...

Let me know
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3908
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 5 other Tax Specialists are ready to help you

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