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Dual-State Taxes

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Munch
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Posts: 4


« on: December 11, 2010, 03:39:30 pm »

I live in Iowa and work in California.  I file non-resident for California tax returns, and resident for Iowa returns.

On my checks from California wages, California deducts all appropriate taxes, etc.
But on certain checks, Iowa is given money for my California wages.  This does not happen on every check, and is not even at Iowa's tax rate.

Check 1:  Iowa gets $34.00
Check 2:  Iowa gets $16.00
Check 8:  Iowa gets $15.00
Check 9:  Iowa gets $26.00
Check 10: Iowa gets $17.00

It appears that when I made less than a certain amount of money, Iowa got taxes paid to them.
1) Why is this happening?  2) Do I need to actually pay Iowa for wages earned in California?
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« on: December 11, 2010, 03:39:30 pm »

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steven
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Posts: 223


« Reply #1 on: December 13, 2010, 07:27:01 pm »

When you started working for your employer, which state withholding certificate form (W-4) have you filled out? Was it Iowa or California? Your employer should be withholding tax for the state of which withholding certificate you have signed. But it does not really matter, since it is only a withholding, it is not an actual tax, so you will get the money back or to the correct state when you do your return. (You get a refund from the state where it was sent incorrectly.)
By the way - working in CA and living in IA does not go together. I assume you do not commute from IA to CA every day. You probably rent an appartment or have a house in CA, correct? If that is so, you work and LIVE in CA.
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Munch
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« Reply #2 on: December 14, 2010, 01:50:20 am »

Thanks for the reply...

The W-4 is from CA.  I do rent an apartment for the time that I work here (in the past I stayed in a motel), as this is a temporary work location.  I only work in CA for part of the year, hence the Non-Resident or Part-Year Resident.  My permanent residence is in Iowa.

Nevertheless, how do I get a refund from Iowa for the withholding they were sent?
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steven
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Posts: 223


« Reply #3 on: December 15, 2010, 04:38:17 pm »

If your resicency is in IA, then I assume you file your IA 1040. On line 62, there is a space for "Out-of-state tax credit." In order to determine your out-of-state tax credit, you have to fill out schedule IA 130. The result from schedule IA 130 goes on line 62 of your IA 1040.

Code:
LINE 62. Out-of-state Tax Credit. All income an Iowa resident earns is taxable
to Iowa to the same extent that it is taxable on the federal return even if the
income was earned in another state or foreign country. If another state or foreign
country taxes that same income, then the Iowa resident may be able to claim the
Out-of-state Tax Credit by completing the IA 130 form.

In other words, when filing your taxes in IA, you tax all your income (the one from CA too), and then subtract your taxes that you paid in CA from the tax that you owe in IA.
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sunset
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Posts: 31


« Reply #4 on: December 18, 2010, 10:40:59 pm »

Nevertheless, how do I get a refund from Iowa for the withholding they were sent?

if you rent an apartment in ca, then you live in ca. you get the refund by filing out their tax return.
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Munch
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Posts: 4


« Reply #5 on: December 21, 2010, 01:55:34 am »

Actually, just because I rent an apartment for the temporary time I work in California, does not mean I live there.  I am what is called a traveler.  I travel for work in different states, not living in any of them.  My home is in Iowa.  I am well aware of these laws and rules, as I've been a traveler for a very long time, so you'll have to trust me on that one.  Even when I would qualify as a part-year resident, the forms to file are the same: "Non- or Part-Year Resident".  Simply renting an apartment or hotel room or anything else absolutely does not mean that you live there for tax purposes.  I still pay for my actual home year-round, even though I'm not physically there.

Back to the tax return...  I do fill out my Iowa returns every year that I need to.  I was simply looking for the correct method and exact way of getting those monies returned from being taxed twice as it seemed.

I have a better understanding of where to look (IA 1040, Line 62 with the IA 130) for instructions, and I must thank you a lot for that.  As soon as I get the time necessary, I will fully read that portion and check it out.
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steven
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Posts: 223


« Reply #6 on: December 23, 2010, 10:37:54 pm »

I was simply looking for the correct method and exact way of getting those monies returned from being taxed twice as it seemed.

It is probably the easiest way. File both returns, and also talk to your employer to avoid CA witholding in the future.

Simply renting an apartment or hotel room or anything else absolutely does not mean that you live there for tax purposes.

You are correct, just renting an apartment does not mean you live there, but a combination of renting and a few other factors may lead FTB to believe so, and renting an apartment is a big argument. Watch out, if you just rent an apartment in CA, you might be lucky and get away, but opening a bank account in CA to cash your checks, starting a membership at a local golf club after work, getting a CA car when your IA car breaks down, opening an account with a local CA dentist when your tooth starts hurting, and going to a CA church when you skip the flight back to IA on Fri evening - a combination of those factors in addition to your renting, and you simply live there. For example, read here:

Code:
There is a presumption that if one is present in California for more than
nine months in a tax year, they are California residents .... contacts, which
are important factors in both the evaluation of domicile and residence, include:
physical presence, employment, business interests, financial accounts, etc.
(source: http://www.caltaxcpa.com/free/CA_residency_memo.pdf)

or also here

Code:
Guidelines for Determining Residency

Amount of time you spend in California versus amount of time you
  spend outside California;
Location of your spouse and children;
Location of your principal residence;
Where you were issued your driver’s license;
Where your vehicles are registered;
Where you maintain your professional licenses;
Location of the banks where you maintain accounts;
Location of your doctors, dentists, accountants and attorneys;
Location of the church or temple, professional associations or social
  and country clubs of which you are a member;
Location of your real property and investments;
Permanence of your work assignments in California
(source FTB Publication 1031, http://www.ftb.ca.gov/forms/96_forms/96_1031.pdf)

Just saying to watch out..

Cheers.
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Munch
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Posts: 4


« Reply #7 on: December 24, 2010, 01:16:50 pm »

Thanks.  I appreciate the details of the debate.  Generally I can argue that I'm employed in CA for less than half the year, which helps.  I also keep my bank accounts back in Iowa, doing direct deposit.  The apartment is month-to-month, no lease, so that helps.  There are certain temporary factors that you do to try making your home-away-from-home as homey as you can, but as long as you can back up the fact that you still have a home to come back to and that you're not setting up camp in the new state to actually live long-term, you're generally fine.  I work 75 hours a week, so there's not really much room to do much else.  Then I get laid off.  It's the nature of the business..  Then on to the next job in another state.  The IRS does understand what a traveler is, especially in today's economy.

I appreciate the inserts Steven.
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anneon
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Posts: 2


« Reply #8 on: September 12, 2013, 06:34:11 am »

Dual status does not refer to your citizenship only to your resident status for tax purposes in the United States . Dual status commonly occurs when a resident of another state . Income taxes paid to other states are addressed through tax credits.
« Last Edit: September 16, 2013, 11:26:51 am by anneon » Logged
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