In: Accounting
25. Robert, who earns income and pays state tax on that income in Arizona, but resides in California, can claim a tax benefit for that tax on the California tax return. The benefit is called what?
A. A credit
B.A deduction
C.An offset
D. Gift
Answer: |
Option A is Correct |
BeCaliforniause of the agreement between Arizona and California, instead of an Arizona resident getting a state tax credit for taxes paid on a California nonresident state income tax return, you need to paid the taxes on this California-sourced income in Arizona and will be allowed an Arizona tax credit on your California nonresident state income tax return. So this means that you will get a refund of your California withholdings but you will need to pay taxes in Arizona on this California source income. |
Arizona, as your resident state, gets to tax your world-wide income. California gets to tax your compensation because it was earned there. |
The nonresident TT/California will begin to prepare a tax credit for the compensation that both states are taxing to help avoid double taxation. You will likely have to help TT/California by entering the amount of Arizona income that California is also taxing (your California compensation). Prepare your resident Arizona return first, then the nonresident California return. |
In TT/California's Nonresident Adjustments, be sure to only allocate as California-source your compensation there. All other income items should be entered as -0- California-source |