fordiscuss[at]yahoo.com (ForDiscuss) wrote:

- quote -

Looks like I answered your question twice. Hope I didn't
confuse you <G> .

As for domicile, it's an antiquated concept, but as state
residency statutes are written, you MUST be domiciled
somewhere. Your original domicile is the place where you
were born, and you can change it only by (1) abandoning the
previous domicile, (2) moving to and residing in a new
location, and (3) intending to remain in the new location
permanently or indefinitely. To give an extreme example, if
you have never established a permanent home for yourself
since you became an adult or moved out of your parents'
home, your domicile is still at the place where you last
lived with your parents.

States generally allow credit to their residents for taxes
paid to other states on income that is taxed by the other
state because it has its source there. Your earnings in CA
are CA source income. If you are a CA resident, that income
is taxable in CA and no credit would be allowed for any tax
paid to IL on that income, because it is from a CA source.
If you are a nonresident of CA and a resident of IL (or some
other state), the state where you are a resident will tax
all of your income and probably allow credit for the tax
paid to CA on your earnings here.

The first thing you must do is figure out where your
domicile is. If you are in CA only for the purpose of
performing a particular contract, and do not intend to make
a permanent home here, and you were not previously domiciled
in CA, then your domicile is not here. I have no idea where
it might be. Where were you living when you began this
peripatetic life? That state may be your domicile.

The next question is the nature of your purpose for being in
CA. Again, if you are here only for the purpose of
fulfilling a contract with a fixed termination date, then
you are here for a temporary purpose. (If you expect to be
here more than 5 years, though, a general rule of thumb is
that anything 5 years or over is not temporary.)

You do not have any IL source income, except to the extent
that you actually worked in IL, and IL has no authority to
tax your earnings from services performed in CA. IL can tax
that income only if you are a tax resident of IL.

I hope this helps ... I can't really answer your questions
without a lot more information.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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katiej_1958[at]yahoo.com (Katie Jaques) wrote:
- quote -

Thank you so much for your detailed response.
This is my situation.

I am not exactly 'domiciled' anywhere. I am a travelling
software consultant and I am supposed to move wherever the
company sends me on a contract basis. It so happened that I
have been in California for the entire period of 2003.I have
my company's address on my W-2 form. I was in California at
the time that I was hired too.

I work for my employer based in IL, on a contract for a
company in CA, and in the process have been living in CA for
that purpose. However, I am still confused, as to which
state I am technically resident of?

Also, If I file my returns as a CA non-resident, would it
mean that I am not a resident of CA for all other purposes
too? And,if I am a technically a CA resident and an IL
non-resident, will IL give me credit for the CA source
income, since the withheld taxes are now with IL?

Any advice is greatly appreciated.
Once again, Thank you.

Atari


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fordiscuss[at]yahoo.com (ForDiscuss) wrote:

- quote -

Well, I'm afraid your employer screwed up. You have IL
source income ONLY to the extent that you performed services
there. If you performed all of your services in CA, then
ALL of your compensation is CA source income and is not
subject to IL tax.

You should file a nonresident return in IL and claim a
refund of all of the tax that was withheld. You will also
file a resident return with CA reporting all of your income.
Unfortunately you may be underwithheld for CA. I would
suggest filing the IL return ASAP so that you might get the
refund before you have to file the CA return, if the cash
flow is going to be a problem for you.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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fordiscuss[at]yahoo.com (ForDiscuss) wrote:

- quote -

It depends on whether you really are a tax resident of CA
and a nonresident of IL. Both states define residence the
same way and the definitions are mutually exclusive: You
are a resident if you are in the state for a purpose that is
not temporary or transitory, or if you are domiciled in the
state and are away for a temporary or transitory purpose.
So the first question is, where is your domicile? (That's
your permanent home, the place to which you intend to return
whenever absent from it.) Second, what is your purpose in
being in CA?

If you are domiciled in IL, you are a nonresident of IL and
a resident of CA if you are away from IL for a purpose that
is not temporary or transitory. If your purpose for being
in CA is temporary or transitory, then you are a resident of
IL and a nonresident of CA, and IL will allow you credit for
the tax you pay to CA on your earnings.

If you are domiciled in CA, then you are a resident of CA
and a nonresident of IL.

Assuming you are domiciled in CA or are in CA for a purpose
that is not temporary or transitory, your employer has made
a mistake that may cost you some penalties. All of your
earnings from services performed in CA are CA source income,
and CA will not allow you credit for any tax you pay to IL
on that income. You have IL source income (subject to tax
in IL) only to the extent that you performed services in IL
during the year.

You should file a CA resident return reporting all of your
income, and a nonresident IL return claiming a refund of all
the tax that was withheld if you performed NO services in IL
during the year. If you did work in IL on some days, you
would prorate your salary by the days in and out of IL, and
claim credit on your CA return for the tax you pay to IL on
that income.

You may be subject to a penalty for underpayment of
estimated taxes in CA. However, if you had no CA tax
liability or were not required to file a CA return for 2002,
the penalty will not apply.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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I work as a consultant to a company based in Illinois. I
have been working and residing in california for the entire
year of 2003. However, the taxes on my W-2 form depict taxes
paid to illinois.

What do I do now?
Can I file as a resident in California, and then claim
credit for the taxes paid to Illinois? And then file a tax
return in Illinois as a non-resident. Is is a valid
assumption?

Please help with my situation.

Thanks

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