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Ca tax on non-resident financial planner.

December 01, 2016 • Louis Rubenstein • Log In to Post Comments

I have a financial planniner client that moved to Texas. He now files a Schedule C. All of his clients live in Ca. He does all the work from Texas and is never in Ca. I understand that he has to file a Ca non-resident tax return and pay tax on all the income from his Ca. clients. I just read that if he forms a Corp. and get's a W-2 as an employee, that he does not have to file a Ca non-resident tax return. Is this true?


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Louis, it's true that if that was his only income from CA that he may not be required to file personal income tax nonresident return. However, his corporation will be required to file a California corporate return, and pay at least the $800 minimum tax, and source all income from California clients to California. However, he will get a deduction for the wages. You will also have to make sure that the salary paid is considered "reasonable compensation."

why is that income taxed to california when the taxpayer had no physical contact with California

Under R&TC Sec. 23101, physical presence is not required for corporation franchise and income tax purposes. 

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