Freightpuppy

My fiance was based in Fresno in 2007 for Skywest but we lived in IL. He filed an IL return and paid IL income taxes. He just got a letter from CA stating that just because you don't live in CA doesn't mean you don't owe them CA state income tax. What's the best way to go about this for you guys that have had a similar situation?

Buck92

Ah, the California Franchise Tax Board... WAY worse than the IRS for trying to get their hooks into you...

If he files in IL (and uses that address on this FED taxes), CA is most likely getting his info from the fact that he pays SDI (disability) tax in CA because he's domiciled there. So they compare SDI rolls with state income tax returns and when there's a discrepancy, they go looking. They may just see if he's willing to believe them about oweing CA taxes and send a check (file a return). If he doesn't, then how hard they come after him depends on how much they think they can get. Part of that depends on how much corroborating evidence they think they have that he actually IS residing in CA and just claiming IL to avoid CA taxes. Owning property or having an apartment in his name (on the lease) complicates things, even if it's just a crashpad that he only spends time in when working.

Definitely make sure his FAA Certs and Medicals have your IL address on them, register to vote in IL, have an IL drivers license, etc. The more stuff like that they find with a CA address, the more difficult it becomes to 'prove' your IL residence. Paying IL taxes alone is not proof enough for CA and they could try to garnish his wages thru Skywest if they think it'll stick.

The cheapest (airline pilot preferred) method to resist at first is to write a certified letter explaining that he's a professional pilot based in Fresno (which they already know) who lives, owns/rents property, files taxes, etc in Illinois and that he's only in California for work and returns to IL each month after work. If they still come back or if there are complicating factors like he owns property in CA (maybe he runs a crashpad), you're probably going to have to consult an accountant who specializes in pilot tax issues. CA, NY, and NC are notorious for hounding pilots for years if they think you owe them. My dad was stationed in CA in the Navy in 1970 for 3 months and never stepped foot in the state again. When he retired 4 years ago, they tried to tax his retirement for earnings 34 years prior!

It is possible, due to their basketcase economy, CA is sending as many "you owe us" letters as possible to generate more revenue and with their limited budget they'll have to pick and choose who to really go after. You can look at that two ways: A Skywest pilot may not seem like someone who makes enough money to really make it worth their while to go after. But he's also not someone who's as likely to hire an expensive tax attorney to defend his case. Good luck.

flap

The key words Fresno is an "Administrative Domicile"

Freightpuppy

We don't have any ties there (no crashpad, property, etc.). There is no way on God's green earth we are just going to send them a check!

Freightpuppy

Please elaboate. Thanks.

Swedish Blender

M,

RocketBob had the same issue. I can't remember if he asked on here or the B&G. Send him a message and see what he found out.

Buck92

Yeah, absolutely right. Sorry -- I confuse even myself, frequently...

Domicile for tax purposes is IL. Airlines use the word "domicile" meaning "based in" but to avoid confusion, if you write them back, I recommend you use the word "based" in any reference to Fresno to avoid confusion. Only use "domicile" to refer to your tax domicile, which is IL.

In addition to aforementioned licenses, leases, property taxes, FED income tax forms with your IL address on them, if you can show major purchases (credit card reciepts) for stuff like large appliances it helps. It'd be pretty unlikely that you'd buy a refridgerator in IL if you live in CA (and vice versa). NOT saying go out and buy a fridge just to avoid CA taxes, but if you make any major purchases, keep the receipts!

forumname

It's happened at my company also. The guidance we got was this;

Check off the appropriate box on the front of the form. Then, on the back explain that he is an airline pilot for (insert company here) and flies in and out of CA, etc..

However, there may be a hang up as there's something about a 50% cutoff. If 50% of the income was earned flying in CA, it may get sticky.

My employer was able to prove to the state of CA that over 50% of the income we earned was outside the state of California. If his has done the same with the state, it shouldn't be a big deal.

I have yet to fill out and send the form back as I just got it this weekend, but from the guys I know that have say you get a letter in the mail from the state to the effect that the matter is closed and requires no further action.

RickyBobby

I thought I had it cleared up several years ago when they tried this, but apparently their economy got bad enough for them to give it another shot last year.

I called them and explained my case. I told them that I thought it was shady they were attempting to extort money from hard working out-of-staters. While I was on the phone the guy checked my drivers license and vehicle registration to confirm that they were both from another state. He "cleared" the claim and gave me a confirmation number.

Good luck.

RB

sailingfun

The key point is how much flying he did out of state. If more then 50% of his flight hours were in the state of CA then he owes CA income tax under federal and state law. He will have to file back tax returns with CA and then refile with IL to get the tax paid there back. If however more then half his flying was outside the state of CA then he files based on where he resides.