Determining California Residency Status for State Income Tax
The first requirement for anyone filing a California state income tax return is determining residency status. This is not always so easy for individuals who earn some of their income in California while not permanently residing in the state. For an enrolled agent California provides particular challenges.
California has two standards for considering someone a resident. The first is anyone who is present in the state for more than a temporary or transitory purpose. The second type of resident is domiciled in California but outside the state for a temporary or transitory purpose. These rules obviously require some definition of the terms. And the state provides this.
“Domicile” is defined differently than merely where a person maintains a residence. California views an individual as domiciled in the state for tax purposes when voluntarily establishing a home with an intention of making it fixed and permanent rather without having a special or limited purpose. It is a place where the person returns when not absent for temporary reasons.
For this reason, a California resident may have a domicile in another state. Alternatively, someone with a domicile in California may be a resident of another state. A person is only permitted to declare one domicile at a time. Changes of domicile occur by physically moving or abandoning a location as well as making a clear intent to stay in a new location.
The definition of a part-year California resident is anyone who changes residency between California and another state during the year. The key concept to residency status is whether a California resident who leaves the state for employment reasons intends to return. Although the state provides more guidance on this matter, accurate interpretation is more certain with assistance from a California enrolled agents.
An individual maintaining a domicile in California who leaves the state for employment consisting of an uninterrupted period of at least 546 days is no longer considered a resident for tax purposes. Spouses and registered domestic partners of an individual covered by this rule are also considered nonresidents when accompanying the individual outside California for at least 546 consecutive days.
However, there are exceptions to this general rule about employment outside the state. An individual maintaining a domicile in California is still considered a resident if that person has annual intangible income exceeding $200,000 or the principal purpose of the absence is avoidance of state income tax. The variety of circumstances causes taxpayers to seek reliable advice from someone with enrolled agent certification.
Return visits to California that don’t exceed a total of 45 days during any year are considered temporary and therefore have no impact on the outside employment rule. Anyone not covered by this rule determines residency based upon the subjective reasoning of facts and circumstances. Enrolled agents located in California can obtain continuing education tax courses involving laws of their state.AÃ¯Â¿Â½ Any individual who is a California resident remains with that status if absences from the state are only temporary or transitory.
Anyone in California for a temporary or transitory purpose is a nonresident. For example, vacationers or students from other states attending California colleges are nonresidents. These individuals therefore only owe California tax on income earned within the state.
Someone in California for other than a temporary or transitory purpose is a state resident. As such, that person is taxed by the state on income from all sources. Individuals spending more than nine months per year in the state are presumed as residents. This includes anyone assigned to an office in California by an employer, retired and present in the state, or recuperating from an illness within the state. Defending nonresident status can therefore become complex. Using an enrolled agent vs. CPA provides the benefit of a professional specifically trained to represent clients regarding only tax matters.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.