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Old 07-08-2012, 08:25 AM
 
1,375 posts, read 2,618,882 times
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My daughter (a college student in NY) has a summer job with a large company in California. She just got her first paycheck and to my surprise, they withheld CO state tax and no CA state tax.

Questions:
1. Do CO and CA have a reciprocity agreement and this is why it was done that way?
2. Is the CO income tax rate the same for income earned out of state?

Anything else I should know?
Thanks.
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Old 07-08-2012, 10:59 AM
 
Location: Everywhere and Nowhere
14,131 posts, read 26,246,015 times
Reputation: 6815
Quote:
Originally Posted by BarryK123 View Post
My daughter (a college student in NY) has a summer job with a large company in California. She just got her first paycheck and to my surprise, they withheld CO state tax and no CA state tax.

Questions:
1. Do CO and CA have a reciprocity agreement and this is why it was done that way?
2. Is the CO income tax rate the same for income earned out of state?

Anything else I should know?
Thanks.
Perhaps it was based on the address she put on her W-4. Some aspects of your questions may be answered here:

https://www.ftb.ca.gov/individuals/faq/ivr/209.shtml
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Old 07-09-2012, 05:56 AM
 
1,375 posts, read 2,618,882 times
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Thanks. That link was very helpful, and yes, her address of record is in CO.
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Old 07-09-2012, 10:19 AM
 
Location: Littleton, CO
3,108 posts, read 4,658,992 times
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She should ask her payroll department to clarify this. According to the link above, she will have to file a tax return in California even though she is not a California resident.

I have a job that I perform in Ohio for 8 days a year, and I am required to pay taxes and file a return for that sum. The same is true for athletes and entertainers when the play/perform in different states.
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Old 07-10-2012, 06:22 AM
 
Location: Eastern Colorado
3,757 posts, read 4,397,860 times
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If she is in California while earning the income, she will have to file a california state tax return, and pay taxes on the money. she will get a credit for those taxes paid on the Colorado state taxes which she will also have to file. usually California's tax rate is significantly higher then Colorado's (they have a tiered system), so if the company is only going to withhold one it would be better if it was California otherwise she will have to come up with that money at the end of the year.
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Old 07-10-2012, 12:48 PM
 
1,375 posts, read 2,618,882 times
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Quote:
Originally Posted by jwiley View Post
If she is in California while earning the income, she will have to file a california state tax return, and pay taxes on the money. she will get a credit for those taxes paid on the Colorado state taxes which she will also have to file.
But they are withholding COlorado state tax, not California state tax.
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Old 07-10-2012, 01:44 PM
 
Location: Eastern Colorado
3,757 posts, read 4,397,860 times
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Quote:
Originally Posted by BarryK123 View Post
But they are withholding COlorado state tax, not California state tax.
Doesn't matter, I was small business/ personal tax accountant for 10+ years, if you are in a state getting paid for work performed there you will be paying that state tax on that portion of the income. She will have to pay tax to California on whatever she makes while physically located in California, and California is known to be pretty stringent in their collections.

for an example I had an lady that had a contract with a California company, she spent 2 weeks out of the year actually in California, before she met me she just blew off filing a California tax return, until she got a tax bill from California for what amounted to 3 years of taxes on her total income, she had to file state returns for all 3 years, plus pay them penalties and interest.

She will also have to pay tax on that income to her home state as well, but the state of Colorado will give her a tax credit to counteract the tax she pays to California, resulting in a net 0 tax owed on her California income more then likely.
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