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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?

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  • My own experience is that it's where you get paid that matters. E.g. working for a company facility located in California meant that I paid taxes to California, even though I was not a resident, nor did I stay in the state more than 4-5 days at a time. I just had to fill out the non-resident tax form. (The company was large enough to have facilities in many states, including the one where I live.)
    – jamesqf
    Feb 26, 2021 at 4:01
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    @jamesqf: If you were a California nonresident, you should only have been taxed by California on work performed when physically in California. Where the company is located and where you get paid don't matter. If you were in California for 4-5 day periods, then your work performed during those periods is taxable by California. But work performed in other periods is not taxable by California if you are a California nonresident.
    – user102008
    Feb 26, 2021 at 22:48
  • Why on earth would a company open another branch and deal with a new regulatory environment for a single employee to live in that state for part of one year?
    – quid
    Feb 27, 2021 at 4:36
  • @user102008: That's not how it worked for me. Everything from that employer was taxed by California as nonresident income. But income from other work (for different clients) wasn't taxed. But I'm not a tax lawyer, and am just going by my reading of the instructions.
    – jamesqf
    Feb 27, 2021 at 21:21
  • @jamesqf: Well let's look at the instructions. Publication 1031, in Income Taxable by California (page 6), says "Nonresidents of California are taxed only on income from California sources." And then later in Wages and Salaries it says, "Wages and salaries have a source where the services are performed. Neither the location of the employer, where the payment is issued, nor your location when you receive payment affect the source of this income."
    – user102008
    Feb 27, 2021 at 23:42

2 Answers 2

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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.

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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.

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    Even if you don't live there, they'll still tax your income if you work there.
    – jamesqf
    Feb 26, 2021 at 16:50
  • @jamesqf: But the OP will not be working in California for those months -- the OP will be working in Pennsylvania since he will be physically in Pennsylvania when he is performing his work.
    – user102008
    Feb 26, 2021 at 22:42

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