Incentive Compensation Distribution on W-2

[me-carney]

A taxpayer has retired and moved to a state with no income tax (WA) from a state with income tax (AZ) in December of 2022.  They closed on the AZ house on January 6, 2023.  They received a distribution from incentive compensation in 2023 and it is on a W-2.  The state wages and withholding are listed on the W-2 as AZ income. They have lived in WA for the entire year (2023).  Should the compensation be taxed in AZ thus meaning they will have to file an AZ tax return?  If they continue to receive distributions from their former employer, should it always be taxed in AZ meaning they will continue to file AZ tax returns? 

I couldn't find the regulations for this and would appreciate it if you know where I can find them. 

Thanks in advance for your help. 

[Just-Lisa-Now-]

Where were they a resident of when they received the payment?  Thats the state that will tax the income.

You may need to file a Non Resident return if state withholding was taken by the state they no longer live in.

[BobKamman]

More important when they closed on the WA house, than when the sale in AZ took place. But was any of that gain taxable?  Might have to file AZ anyway, then.   If this were a pension, it would not be taxable once they leave AZ.  But for W-2 income, I would want to know more details of the "incentive compensation" plan.  

[qbteachmt]

Is that employer AZ?

"Nonresidents are subject to Arizona tax on any income earned from Arizona sources. Nonresidents may also exclude income Arizona law does not tax."

https://azdor.gov/individuals

[sjrcpa]

If AZ is like NY, they'll tax deferred comp earned while a resident no matter when it is paid.