Hoping a knowledgeable CA tax preparer might help me expedite my research... Taxpayer and spouse filed MFJ California state tax return for 2023. Taxpayer moved to Indiana in early Jan 2024 to take a new job so was an Indiana resident for the entirety of 2024. Taxpayer had a W2 with both California withholding and Indiana withholding tax. However, the withholding of CA state tax was in error and there should have been no CA tax withheld since he worked in Indiana the entire year and was an Indiana resident at the time. Spouse stayed and worked in California for the entire year 2024 and received a W2 with California withholding. Client wants to file 2024 federal and state. The question is how to report for 2024 for California. I would think that the taxpayer would file as a non-resident and the spouse would file as a resident. It appears that this be done on a MFJ California return 540NR? Or would each file a MFS return for CA? Spouse moved to Indiana in 2025. Any other concerns that could trip me up?
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While I am not not familiar with either California or Indiana - I have had a similar experience with a situation where a married couple completely lived in two different states for full year.
For 2024 the Federal return can be married filing jointly. But both state returns need to be married filing separately.
In the year spouse moves from California to Indiana - I suggest you file the spouse as a part-year resident for California, and for Indiana a part-year joint return allocating her income for the residency period. So there will or should be a refund from California and a balance due to Indiana.Uncle Sam, CPA, EA. ARA, NTPI Fellow -
California requires same filing status as federal, but it is not a problem in your scenario. Not sure why so many think the state returns need MFS filing status, that is not the case for using CA Form 540NR.
California is a community property state, so half of the spouse's CA income and withholding belongs to the IN spouse, which is why the IN spouse needs to file a CA return. (the MFJ 540NR).
Unless the taxpayers moved exactly on Dec. 31st or Jan. 1st, they will be part-year residents of each state for the year they moved."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard
"That's enough! When you didn't know what you were talking about, you really had something! [to Curly]" -Moe HowardComment
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