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If I move out of state for 6 months to work remote, how do I setup my tax residence?

Personal Finance & Money Asked by smagnan on July 8, 2021

Currently my wife and I are living in California. I work remote for a company there. I am not a US citizen but I have an EAD (work authorization) in case it matters. So for now, I have been a California tax resident.

My wife is pregnant and we are considering moving back with her parents until the baby is born and then a few months old. This means moving to a different state (PA). We would live in her parents house for free, and I could work remote from there. The plan is to move back to California afterwards.

After talking with my company, if we move our options seem to be:

  • the company opens a branch there (PA). I can then setup myself as a PA tax resident for the 6 months we’ll be there. But this is a bit of work both on company side and my side. That’s what my company proposed but they don’t have much experience with this setup and that they were not sure they would be allowed to open a branch in PA (foreign company with US sub-entities).
  • We move to PA but we keep an address in CA (renting a small place or similar). Which means physically I’d be living and working from PA but our address / utilities would be CA based, and we could stay CA tax residents, especially since we plan to move back, as I mentioned.

I couldn’t really find any clear information on the second option. Is this something that’s common? Is it legal since it is just a temporary move?

2 Answers

If your company is inexperienced in this area, they should start their research with their payroll software. Having a remote employee in another state is a very common occurrence.

Here's a relevant article from Quickbooks Payroll.

Answered by Orange Coast- reinstate Monica on July 8, 2021

Currently California claims the ability to tax all of your income, and because you live there and you work there no other state has any ability to tax your income.

If you want to have your income taxed only by Pennsylvania while you are living and working in Pennsylvania, then make a clean break from California. Don't own or lease anything there. Register your cars in PA, get a PA drivers license, register to vote, have all your bills sent there. etc.

This works best if you are not planning on moving back to California. Moving back within the same calendar year might not convince California that you intended the move to be permanent.

Anything less will cause California to claim the ability to tax all your income. You will have to determine what Pennsylvania will do. If you are there temporarily for months they may claim the ability to tax your income. Each state has different tax laws regarding this.

Your company will have to determine what obligations they have regarding tax and labor laws.

Answered by mhoran_psprep on July 8, 2021

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