Another spin on an income tax situation.....

My wife and I will be moving permanently from CA to our home in AZ at the end of September. She will keep her job, and become a "virtual" employee, meaning even though her company is in CA (and does no business in AZ), and the accounts she supports will all be in CA, she will perform all of her work remotely, in AZ.
-Will she be liable for paying state income tax in both CA and AZ?
-Once we move, should her Co. NOT deduct state taxes, and leave that to us to settle at tax time?
-Does her Co. even have the ability to revise her state income tax witheld from CA to AZ?
-Should she just become a 1099 employee, going forward, with no taxes witheld?
-Do I need to factor in a treadmill somewhere here as well? LOL
-I know I need to find an accountant in AZ, but figured I would ask the brain trust here first.

Normally the company will deduct the state taxes in which the employer pays. At least that is how it works when my wife has worked remotely. We the had to reconcile what state was owed when we filed.

Once she has a AZ DL, have her update her address to AZ with her company. For tax year 2017 you will file a CA resident tax return and a AZ non-resident tax return (since you will not have enough days in AZ to qualify for the full year). Income earned in CA (Jan-Sept) will be taxes as CA income, income after Sept will be AZ income.
For tax year 2018, you will file a AZ resident tax return and nothing in CA.

Singleton has it pretty much correct.

check with your accountant you may be able to split the year and pay California taxes for the months that she was a resident of California, you would pay Arizona taxes for the remaining months .

To make this happen and go forward it's important that her employer once you move immediately enter her new address so the state of residency is coded they wouldn't normally deduct Arizona income tax from her weekly paycheck which will be deposited with the state of Arizona.

my wife works for a company out of Wisconsin, her assignment is in California, she works half of the time virtual from Arizona where we live.
She gets (2) W-2's at the end of the year with the income separated according to her time spent in each state. One for the time she spends on site in California, and one for her virtual Arizona.

My wife is in the same situation, works out of home home in AZ for a company headquartered in Chicago,.. Her main territory is CA. Welcome to the best of both worlds, CA income with AZ cost of living.... Only pay AZ income taxes.

She will have to pay estimated AZ and still file in CA. The company will withhold CA taxes and then you get that all squared away when you file tax returns.

I think it depends on what her W2 looks like.

The company will make the decision whether or not her work is subject to california income tax and the W2 will reflect that decision.

If the both or you move to Arizona and become residents, you will definitely need to file an AZ return but depending upon what the company reports (which you can certainly argue with them about), you may or may not have to file a non-resident California tax return.

530RL said:

I think it depends on what her W2 looks like.

The company will make the decision whether or not her work is subject to california income tax and the W2 will reflect that decision.

If the both or you move to Arizona and become residents, you will definitely need to file an AZ return but depending upon what the company reports (which you can certainly argue with them about), you may or may not have to file a non-resident California tax return.

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I have lived in AZ as my primary residence for about 10 years. My company (C Corp) is in CA. I am an employee like everybody else. Our/my company withholds CA taxes and I file a return and basically get all that back. AZ requires me to do the estimated tax deal.

resident-state: the state where you live. Your resident state taxes ALL of your income, regardless of what state it?s earned in. AZ is the only place will file.

If you're working remotely from your AZ home for a company in California and receive a W-2 form with two states listed, both AZ & CA, then you'll also need to file a CA non-resident tax return. On this non-resident return, you'll report only the information listed on that W-2 form.