Advice needed for a situation involving job change and work in two states

You are probably going to need some professional help with your state income taxes this year. It appears that your domicile remains in Illinois, since your family is still there and you spend part of your time there. As a domiciliary, you are a resident of Illinois unless you are absent for a purpose that is not temporary or transitory. As a result you are probably still a full year Illinois resident for income tax purposes, taxable there on all of your income, from all sources. Illinois will give you credit for the tax you pay to California on your California earnings. You would file a joint, full year resident return in Illinois.

You may also be a part-year resident of California. California defines a tax resident to include anyone, wherever domiciled, who is present in the state for a purpose that is not temporary or transitory. If you have accepted common-law, open-ended employment in California, that would generally be considered a non-temporary or transitory purpose. It is entirely possible, and often happens, that an individual is considered a resident by two states at the same time. However, if your California employment is intended to be temporary, i.e. to last only until you can find full time employment back in Illinois, you may be a nonresident of California.

If you are a part-year California resident, you will be taxable in California on all of your income, from all sources, from the time you came to California to take up your employment here. You have Illinois source income arising from the work you did for your California employer at home in Illinois, and California would give you credit for the tax you paid to Illinois on that income. However, if you are a nonresident of California, California will not allow you any credit for taxes paid to Illinois.

The determination of your resident status and the mechanics of the credits for taxes paid to other states are complex issues that will need to be addressed by a tax professional who has access to all of the facts and circumstances of your particular case. Based on what I know, I would probably suggest that you file as a full year resident of Illinois and as a nonresident of California, but that could change depending on facts not available here. Note that as long as your domicile remains in Illinois, the division of income between you and your wife will continue to be determined under Illinois law; California community property law will not apply to you even if you are a California resident for income tax purposes. As a result, as either a part-year resident or a nonresident, you may file either jointly or separately in California, since your spouse will be a full year nonresident and have no California source income.

Katie in San Diego