Source Tax

[TAXMAN]

TP works from home in NV. Is paid by a CA employer. Is this income taxed to CA as a NON Resident. TP never goes to CA. All work is done by internet and phone. My take it is. The CA employer filed the w-2 with NV being in the state box and matches the Wages in Box 1.

[Possi]

I would not think it is taxable in CA.

Lots of businesses are based in a different state. The business files its own return in CA, but the employee would not because the employee doesn't work in CA, doesn't live in CA.

Let's see what others have to say.

[Lion EA]

You will have to look to each state for it's own regulations.  And, they can be very different.  In my neck of the woods, CT taxes work performed in CT while NY taxes work performed in NY &/or under the control of a NY entity.  So, an employee of a NY company working from home in CT could be subject to tax in both states on the same income and might not qualify for a credit for taxes paid to the nonresident jurisdiction.  (If the NY employee traveled to clients in CT for the benefit of his employer, that would be work performed outside NY for NY tax purposes, but that's not what you asked.)  Look on the CA and NV websites for their laws and explanation &/or read the instructions.

[jklcpa]

In this client's case, I'd use the W-2 as prepared.

If the employee is a nonresident and never sets foot in CA, the wages would not be taxed in CA. If the person does make an appearance within the state, that's a different story. CA uses a "source" rule to determine this. 

You can read it here under "compensation" : https://www.ftb.ca.gov/individuals/fileRtn/Nonresidents_PartYear_Residents.shtml

Also, here is a very good article that explains it too. Its focus is on the CA auditing businesses with remote employees, but the explanation is there: http://www.sangerlaw.com/Articles/NonresidentsWorkingRemotely.pdf

[BulldogTom]

Sounds right to me the way they presented the W2.  But look closely and make sure there is no CA withholding or CA SDI on the W2. 

If a CA company employs a worker who does no work in the state, CA will not tax the non-resident for those wages.  There are 2 things at work here, the domicile and where the work is performed.  If the employee is legitimately domiciled in NV, and the work was also done in NV, there is no tax to CA.

As Controller in my day job with employees in NV, I have prepared these types of W2's. 

Tom
Newark, CA