California ... Resident, Non-Resident or Part-Time Resident???

[Steve Stang]

I have a client who has a tax domicile and residence in MA. Last year he took a job with Tesla and relocated to CA where he rents an apartment but nearly every other week flies back home to spend the weekend with his wife and kids. (Nice gig if you can get, I'm sure some are thinking). The job opportunity was too sweet for him to pass up but his roots are in MA: wife, toddler twins, property, banking, driver license, voter registration, doctors, etc.

According to CA Franchise Tax Board Publication 1031 on page 4 (temporary or transitory), there is an example that almost describes his situation. He moved for an indefinite job assignment ('at will' employee).

I think that he is a 'resident' for CA tax purposes based on this example and the publication's definition.

Tesla issued the client two W2s: one showing CA withholding and one showing MA withholding. Both show his MA address.

I'm also thinking that because MA is not a community property state that I do not include any of the wife's MA W2 income.

Any thoughts? And any restrictions on a non-CPA tax preparer e-filing for this?

Thanks.

[taxea]

i would file him MFS NR of CA

[Rapid Robert]

I have a client who has a tax domicile and residence in MA. Last year he took a job with Tesla and relocated to CA where he rents an apartment but nearly every other week flies back home to spend the weekend with his wife and kids. (Nice gig if you can get, I'm sure some are thinking). The job opportunity was too sweet for him to pass up but his roots are in MA: wife, toddler twins, property, banking, driver license, voter registration, doctors, etc.

According to CA Franchise Tax Board Publication 1031 on page 4 (temporary or transitory), there is an example that almost describes his situation. He moved for an indefinite job assignment ('at will' employee).

I think that he is a 'resident' for CA tax purposes based on this example and the publication's definition.

I think you are correct; he may be a domiciliary resident of MA and a statutory resident of CA. Since neither spouse is domiciled in CA, there are no community property issues to deal with. Unless both spouses are full-year residents, you would use the NR form, as previously suggested. But as for filing MFS, in CA I believe you must use the same filing status as federal, the only two exceptions being military servicemembers and RDPs. So unless filing MFS federal doesn't hurt the taxpayers, you are going to need MFJ filing on the NR long form for CA. The good news is, only the one resident spouse's income will be subject to tax in CA. I assume MA has an "other state tax credit" to eliminate any potential double taxation.

As for a nonlicensed preparer, that alone is not a problem. If you've never used the CA 540NR long form, it is a little tricky. There are five columns used to show total income, and then income taxable to CA. A common mistake is to make adjustments for the other state in column C instead of column E. Also note that the CA tax rate is based on total income, but only applied to the CA taxable portion.

So yes, the spouse's income will be included on the return to determine AGI, but it won't be taxed.

[Steve Stang]

Thanks for the info and citations. Very helpful.

One more twist to add: Since Tesla has a location in MA and the TP travels back and forth with some duties at the MA location, is it possible to deduct on Form 2106 the travel expenses? A possible stretch but wanted to check if anyone's had this experience.