Multi State Questions

[Justataxguy]

Client separated from wife (not legal separation, left her/sent back home - whatever) in California February 2 last year, moved back to NY state, but worked from NY home for same CA company through September, then had some NY wage income and also took 401K money as a NY resident. Wife is disabled and only has SS income. Apparently they don't communicate from what I could gather in his interview. I believe he has to file MFS as they weren't living apart for all of 2014, don't believe wife will have to file as she only has SS income. My question is how to appropriate the income correctly between the 2 states as most is CA source but earned mostly in NY. Only had CA state tax w/h other than fed for CA source income.

[ATSMAN]

Client separated from wife (not legal separation, left her/sent back home - whatever) in California February 2 last year, moved back to NY state, but worked from NY home for same CA company through September, then had some NY wage income and also took 401K money as a NY resident. Wife is disabled and only has SS income. Apparently they don't communicate from what I could gather in his interview. I believe he has to file MFS as they weren't living apart for all of 2014, don't believe wife will have to file as she only has SS income. My question is how to appropriate the income correctly between the 2 states as most is CA source but earned mostly in NY. Only had CA state tax w/h other than fed for CA source income.

I believe your client has to file a part year CA, non resident CA and Part year NY. I agree filing status is MFS.

You will have to look at the W2 figures and where it was earned to create a spreadsheet to allocate the income to the correct states. I agree the 401(k) 1099-R would be on NY return not CA. At the end since he ended up in NY, if NY taxes the same income you can get a credit for taxes paid to CA on the same income. It is not always a 100% credit due to different tax rates by I believe all states have a worksheet to figure out credit for taxes paid to another jurisdiction.

[rtsietsema]

Must file MFS?

Just a side note. I believe he may wish to go MFS, but living apart has nothing to do with that filing status. A couple can be living together and have either spouse choose MFS.

He could, if he and his wife agree, still go MFJ could he not?

[TAX4US]

Just another note. What happens to her ss if MFS and did not live apart all year? May want to check this.

[Justataxguy]

He could, if he and his wife agree, still go MFJ could he not?

He indicated that is not a possibility.

[Roland Slugg]

If they are still legally married (or were as of 12/31/2014), they can file a joint return, and it would probably be much better for them to do so.

[Gary2]

Just another note. What happens to her ss if MFS and did not live apart all year? May want to check this.

If they lived together at all, and she files as MFS, then her base amount for the social security calculation is zero. It's possible that after exemption and deductions that there's still no tax due.

[Justataxguy]

Another Question

Same client took early 401K while NY resident. Showing up on CA return with CA penalty for early withdrawal (form 3805P). I can't find anything in CA instructions about any exceptions for it being excluded because it wasn't CA source income or received during CA residency. Is this correct?