You lived or made money in a community property state ??
I lived in CO all year and my wife lived in NY all year. Neither of us stepped foot in CA. We are doing Married Filing Separately.
I had some income from a CA source reported on a 1099-NEC, which I've found is taxable by CA. FreeTaxUSA is giving me a warning starting with "You lived or made money in a community property state" (ie, CA). Is this relevant in my case, since neither my wife nor I lived in CA, but I made money in CA? Or is "made money in" different than "made money from"?
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Hi lisae,
Even though that income reported on the 1099-NEC to be CA source income, generally you must work IN CA. In other words, you must be present in CA doing the work for it to count as CA source income.
You said you did not step foot in CA. It sounds like you are working remotely in CO and so the income is NOT reported on a CA return. So yes, "made money in" is very different than "made money from". Report all that income on your CO return.0 -
Thanks for the input. I appreciate it.
But as far as I have been able to determine, CA is odd in that if you are working completely remotely, W-2 income from a CA company is NOT taxed by CA, but 1099-NEC income IS. Can someone who knows for sure, comment, along with your credentials, how you know, or an authoritative reference?
Any other opinions on the community property state question?
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Hello lisae:
Assuming you are a non-resident of CA, and do not physically work in CA, your W-2 wage income is not subject to taxation by CA. The fact that your W-2 wage income is paid by a company based in CA is not relevant. What is relevant, in terms of whether CA can tax your wage income, is the location where you perform your services. If you perform your services outside of CA, even though the company is based in CA, your wage income is not subject to taxation by CA.
As support for the above, take a look at the 2024 CA Franchise Tax Board Publication 1031 which provides the following regarding how W-2 wage income is taxed:
“Wages and salaries have a source where the services are performed. Neither the location of the employer, where the payment is issued, nor your location when you receive payment affect the source of this income…” (see page 6)
According to the CA Franchise Tax Board website, the 2025 version of FTB 1031 has yet to be issued, but will be available soon, see
Regarding the income reported on a 1099-NEC, such income is typically earned by an individual considered to be an independent contractor or self-employed person. As such, it is fairly characterized as income earned in connection with a business. As “business income” here again, it is necessary to determine the location where the services are actually performed in order to determine whether the income is properly taxable by CA.
Publication FTB 1031 treats business income essentially the same way it treats wage income in that if the person performing the services is a non-resident of CA, then only those services performed within CA are subject to tax by CA. Any services performed outside of CA, even though the company is based in CA, are not subject to tax by CA. In situations where services are performed both within CA and outside of CA, then the taxpayer needs to make the appropriate allocation.
Regarding the taxation of business income, FTB 1031 provides the following:
“A nonresident’s income from California sources includes income from a business, trade, or profession carried on in California. If the nonresident’s business, trade, or profession is carried on both within and outside California,
the income sourced to California may be based only on the business conducted within California, or may be determined by using the apportionment formula for corporations engaged in multi-state businesses…” (see page 7)0 -
Thanks so much!! Now it sounds like none of my income would be taxable by CA!
I have to file a CA return to get withheld money back. So should I put $0 as CA-income for both wages and self-employment?
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However… What about "the case of Bindley vs. FTB, 2019-OTA-179P. Blair Bindley was a screenwriter living in Arizona. He had no business presence in California, no employees in California, and never even set foot in the state. He did, however, provide screenwriting services to California companies. Based on that, California still claimed (and the appeal court upheld) that he owed CA tax on his income – because his screenplays were sold to companies in California."
This ruling says that if your business is unitary [sounds like mine is], the income derived from services is sourced to the place where the benefit of the service is received. As my work is similar to screenwriting in this sense, I'm back to owing tax on the 1099 income.
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For anyone looking for information about the community property state question… I called the CA Tax Board and the customer service person said it was irrelevant in my case. It would apply only if at least one spouse lived in CA.
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Colorado is also a community property state.I use the mnemonic device TWINCLAN (plus Wisconsin) and for some reason I thought there were 2 'C's. Oops.
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The IRS and other sources say the community property states are
- Arizona.
- California.
- Idaho.
- Louisiana.
- Nevada.
- New Mexico.
- Texas.
- Washington.
- Wisconsin.
(https://www.irs.gov/publications/p555)
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Sorry - yes, you're right.
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Hello lisae,
Ultimately, it is up to you whether or not you want to report the income from that 1099-NEC as California income or not. There can be different interpretations of what is considered CA source income.0
