Need confirmation on California Income Taxes

[NECPA in NEBRASKA]

My son will be commuting to LAX as a pilot, but lives in Colorado. He will just be staying in a hotel when necessary. He will not be signing a lease on a crash pad. He told me yesterday that he was told that he will have to pay California income taxes, so that I had better learn the rules. He has flown in and out of California before, but this time it will be his base with the new airline until October.

I have been doing some research and I think that he should fall under the transportation worker rules and file in his home state. Am I looking this up incorrectly or has something changed?  

Thanks,

Bonnie

[Lee B]

Is this similar to players of pro sports who have to file and pay taxes in every state where they play a game ?

[NECPA in NEBRASKA]

2 hours ago, cbslee said:

Is this similar to players of pro sports who have to file and pay taxes in every state where they play a game ?

I don't think that it is the same because they are transportation workers. I was hoping that California tax preparers would know if my research was correct. He says that most of his flying would be long distances and not inside of California. He expects his income inside of California to be less than 50% of his total. 

[BulldogTom]

Bonnie,

I have never had a client who was a transportation worker, so I am not familiar with those rules.  

You son will still be domiciled in Colorado.   Working in CA temporarily does not change that.   He will file a 540NR next year for the time he was "based" in CA.

What I have always done (right or wrong) is follow the W2 for state wages if the client is a non-resident CA taxpayer.    It is a powerful third party document for either side if there is a dispute.   Never had an issue using that method.  If audited, the State would have to prove that the employer improperly completed the forms, and that the taxpayer knew or should have known that the employer document was incorrect.   Pretty tough hurdle for the FTB to get over.

Make sure he keeps track of all his unreimbursed expenses.   CA never conformed to the 2017 Tax Act (something about never agreeing with anything a certain former POTUS advocated).   Those 2106 expenses are deductible on the CA return.   You will show them on the "state only" portion of the 2106 and they will be applied on the Schedule CA (California Adjustments).

Reach out if you have any specific questions.

Tom
Longview TX (56 prior years in CA)

[NECPA in NEBRASKA]

1 minute ago, BulldogTom said:

Bonnie,

I have never had a client who was a transportation worker, so I am not familiar with those rules.  

You son will still be domiciled in Colorado.   Working in CA temporarily does not change that.   He will file a 540NR next year for the time he was "based" in CA.

What I have always done (right or wrong) is follow the W2 for state wages if the client is a non-resident CA taxpayer.    It is a powerful third party document for either side if there is a dispute.   Never had an issue using that method.  If audited, the State would have to prove that the employer improperly completed the forms, and that the taxpayer knew or should have known that the employer document was incorrect.   Pretty tough hurdle for the FTB to get over.

Make sure he keeps track of all his unreimbursed expenses.   CA never conformed to the 2017 Tax Act (something about never agreeing with anything a certain former POTUS advocated).   Those 2106 expenses are deductible on the CA return.   You will show them on the "state only" portion of the 2106 and they will be applied on the Schedule CA (California Adjustments).

Reach out if you have any specific questions.

Tom
Longview TX (56 prior years in CA)

Thanks, Tom. I will have to wrap my brain around unreimbursed employee expenses again. 

[Lion EA]

Will his tax home be CA?

[Lee B]

There are a number of TaX Court cases in this area.

[NECPA in NEBRASKA]

20 hours ago, Lion EA said:

Will his tax home be CA?

Lion, If my reading about the Railway Labor Improvement Act is correct, his tax home should not be CA. It all depends on how much of his flight time is spent in CA air space.  He is expecting much longer flights, but air travel is unpredictable these days. I am hoping not to strain my brain for CA returns, since I have not prepared one for at least 10 years. I know that there are tax preparers that specialize in transportation clients, so when or if the rules change, they can pay to get their taxes done. 

[BulldogTom]

@NECPA in NEBRASKA

Bonnie, I spoke to a friend (not a client) today who is an airline flight attendant domiciled in TX.  She confirmed what I thought...the airline assigns her wages to her home base assignment.   She was based out of CA for a portion of 2020 and 2021, and her W2 reflected earnings to CA for that period of time, even though her flight hours in CA were actually a small percentage of her total flight hours while she was based in CA.    I have a feeling this is what you will see when your son gets his W2.   

Not sure if this helps...

Tom
Longview, TX

[NECPA in NEBRASKA]

On 3/13/2022 at 1:26 PM, BulldogTom said:

@NECPA in NEBRASKA

Bonnie, I spoke to a friend (not a client) today who is an airline flight attendant domiciled in TX.  She confirmed what I thought...the airline assigns her wages to her home base assignment.   She was based out of CA for a portion of 2020 and 2021, and her W2 reflected earnings to CA for that period of time, even though her flight hours in CA were actually a small percentage of her total flight hours while she was based in CA.    I have a feeling this is what you will see when your son gets his W2.   

Not sure if this helps...

Tom
Longview, TX

Thanks, Tom. I guess we will be prepared for whatever shows up on the W2. He has heard both answers from other pilots.