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Discussion:CA Source Income Taxed to Non-Residents

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Discussion Forum Index --> Advanced Tax Questions --> CA Source Income Taxed to Non-Residents

Discussion Forum Index --> Tax Questions --> CA Source Income Taxed to Non-Residents

Tax Writer (talk|edits) said:

23 March 2010
Our office has a client who was a CA resident and now resides in Montana. He is a full-year Montana resident. Client has CALPERS pension income.

We were going to advise the client that the pension was not taxable to CA, but now the client says he recived a fax from CALPERS with this attachment:

"If you reside outside CA, no CA State taxes will be witheld. However, we have been advised by the CA Franchise Tax Board that pension benefits paid by PERS are considered CA source income and PERS is required to report the payments to the CA FTB." The letter is dated NOV 10. 2009.


Didn't CA lose this case years ago? Are they trying to tax resident and non-resident pension income again?

Taxea (talk|edits) said:

24 March 2010
I think that all PERS is saying is that they have to report it to CA, not that it is taxable if the TP lives out of state....I moved to Hawaii when I retired and my PERS is not taxable to CA.

KatieJ (talk|edits) said:

31 March 2010
I'm a bit late chiming in here, but ...

Seems the FTB (or somebody there) has gone off the rails. I've known it to happen occasionally over the years <G>. Usually gets straightened out eventually. Or maybe it's somebody at CALPERS who misunderstood something.

California didn't lose a case; it lost in Congress. Federal law (4 U.S.C. Sec. 114) prohibits all states -- not just California -- from taxing certain retirement income of nonresidents on a source basis. This applies to payments from tax-qualified plans, such as PERS, received on or after January 1, 1996.

They can try, but they can't win. Don't report that pension income as California source income. If the client gets further questions, respond citing the federal statute.

Tax Writer (talk|edits) said:

31 March 2010
I thought that was right; for a minute there I thought I was going crazy. I really appreciate your California knowlege and I always look for your posts.


Tax Writer

IDrinkYour Milkshake (talk|edits) said:

31 March 2010
CA is broke. Help CA out!

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