Taxation of California pension income for a part-year resident moving to Washington state

[Dodgerfan]

My client moved to Washington state on June 4, 2023. She receives pension income from Calpers each month. She did not inform Calpers that she had moved. California taxes were taken out for the entire year. A 2023 1099-R was issued as if she was a resident of California for the entire year.  Does the 2023 1099-R need to be corrected for the period of time she was a nonresident? Can the taxable amount be adjusted for the period of time she was a nonresident and not have a 1099-R reissued?

[TitoBonsai]

Does the 2023 1099-R need to be corrected for the period of time she was a nonresident? - No

Can the taxable amount be adjusted for the period of time she was a nonresident and not have a 1099-R reissued? - Yes

In Screen 13 Pensions, IRAs (1099R), create two payers: both Calpers

In the first Calpers, designate State = CA, and enter Gross distribution, Taxable amount, etc. (except State tax withheld) = 41.7% (5/12) of the amount shown on Form 1099-R. Enter State tax withheld = 100% of the amount shown on Form 1099-R.

In the second Calpers, designate State = WA, and enter Gross distribution, Taxable amount, etc. (except State tax withheld) = 58.3% (7/12) of the amount shown on Form 1099-R.  Enter State tax withheld = 0.

[PhoebeRoberts · Accepted solution]

Note that you can accomplish the same output with only one 1099-R payor by hitting Ctrl+E in the gross distribution and taxable amount fields and entering two lines there, coding one line as CA and one line as US. (WA has no personal income tax; if the second state were a state with a tax return, you'd use that state code.)

[BobKamman]

They probably continued to have California tax withheld in 2024.  Which means, filing a 540NR to get a refund.  I did that for a client a few years ago, and being a nice guy I didn't charge them for it.  I told them to tell the state to stop withholding tax, but they had better things to do in retirement.  So the next year I did another 540NR, and FTB sent them a bill for penalty owed because the box was not checked to indicate they have health insurance.  Thankfully, they are no longer clients.  

[Dodgerfan]

Thank you to everyone who responded. This was the best response although all three responses were helpful.