Do I need to pay California income tax if my employer is in Massachusetts and I'm a Texas resident?

Question

I worked 7 months in California as a contractor. My employer is in Massachusetts but the client is in California. Based on the non-resident income tax form, only California source income is subject to income tax. I think my income is not based in California. Am I correct? My employer withheld CA income tax.

I worked 7 months in California as a contractor. My employer is in Massachusetts but the client is in California. Based on the non-resident income tax form, only California source income is subject to income tax. I think my income is not based in California. Am I correct? My employer withheld CA income tax.

Thanks for all the replies. The reason that I don't think it is CA source income is because I never seen anyone on business trip to CA ever had tax withheld even when staying for extended period of time.

Answer 1

In California, Wages and Salaries have a source where the service is performed. The location of the employer does not affect the source. So if the work was done in California, it's subject to California Income Tax.

See page 4,
http://www.ftb.ca.gov/forms/06_forms/06_1031.pdf

See Form 587
http://www.ftb.ca.gov/forms/07_forms/07_587.pdf?refresh=98543

Your company is required to withhold taxes from your paycheck if services are performed in California over $1,500, unless they have applied for and been granted a waiver from the Franchise Tax Board.

As a nonresident, you are taxed only on your income from California sources, including your income for services performed in California.

California allows a credit for taxes paid on income in another state, but being a resident of Texas, this wouldn't apply to you since Texas does not assess income tax.

"Wages and Salaries
Wages and salaries have a source where the services
are performed. Neither the location of the employer,
where the payment is issued, nor your location when you
receive payment affect the source of this income. A
resident must include on Schedule CA (540NR),
column E or Short Form 540NR, line 21 all wages and
salaries earned, regardless of where the services were
performed. A nonresident must include the income for
services performed in California.
Example 1 – You are a resident of New York working
temporarily in California for a New York corporation.
Determination: Your income earned for services
performed in California has a California source. As a
nonresident, you must include this California source
income on Schedule CA (540NR), column E or Short
Form 540NR, line 21."

Individuals working or performing services within California are subject to CA income tax, even if their company does not withhold taxes from their pay. Individuals traveling on business trips are still subject to CA income tax rules if they are paid for services performed in CA during their temporary stay. If their income exceeds the minimum amount required for their filing status, they are expected to file a return and pay the tax due.

Don't feel bad about being subject to another state's income tax. A professional athlete who plays in many states, files a return in each of those states assessing income tax.

Answer 2

Your income is earned in the state you WORK in. In this case, you worked in California, so your employer withheld the correct taxes. You will need to file a CA non-resident tax form to recoup your taxes paid.

Answer 3

You worked in CA - sounds like CA source income.

Answer 4

If you worked in Massachusetts, yes. If you worked only in Texas, no. The location of the employer does not matter. What matters is where you did the work.

Answer 5

I'm not sure, but H&R Block will answer any basic questions for free.... just give them a call!