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Residency and state taxes, part 2: California considerations

In the first part of this post, we began discussing the Changing landscape regarding efforts by state and local governments to tax nonresidents who earn income there. Congress has not acted to create uniform national standards for such taxes.

This leaves states on their own to develop their own legislation governing taxation of mobile workers. In this part of the post, we will turn our attention to how residency issues can affect people and businesses with connections to California.


Tax issues concerning residency do not only affect those who live in one state but work in another. Such issues can also affect people who spend part of the year in California or have a home there, but maintain residency for tax purposes in another state.

If you have contacts like this, taxing authorities from California or the IRS could claim that you owe state taxes in California. Don't feel, however, that you have to simply knuckle under and pay up if contacting by revenue agents or subjected to an audit. An experienced tax attorney can help you deal with the tax agencies and resolve the matter as equitably as possible.

The California Franchise Tax Board has many specific rules that apply to part-year and nonresidents. There are many aspects to this, including withholding obligations for businesses that employ nonresidents. The advice of a seasoned tax lawyer can help you sort out what applies to you - and of course which forms are involved.

Some of the questions get very technical. This is reflected in the fact that the Franchise Tax Board has a technical manual on residency and income-sourcing. This manual includes on guidelines for audits.

Please visit our page on residency issues for more information about our practice in this area.

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