How do I handle paying state income tax for a summer internship in a different state?

You'll need to file tax returns in both states, but you shouldn't be double-taxed on the same income. Here's how it typically works: For California, you'll file a nonresident return (Form 540NR) reporting only the income you earned while working in California. Since the company already withheld California taxes, this will determine if you paid the right amount or need a refund. For Arizona, you'll file as a resident and report ALL your income, including what you earned in California. However, Arizona should give you a credit for taxes paid to California to avoid double taxation. Look for Arizona's credit for taxes paid to other states on Form 140. Make sure you keep track of exactly how many days you worked in each state, as this can affect your tax liability. Also, some states have reciprocity agreements, but Arizona and California don't have one, which is why you need to file in both places.

After struggling with a similar situation last year (internship in Washington while being a Colorado resident), I found this amazing tool called taxr.ai (https://taxr.ai) that saved me so much stress. It analyzes your specific multi-state situation and walks you through exactly what forms you need and how to fill them out correctly. I was especially impressed with how it handled my part-year residency situation. It asked questions about when I moved, how long I stayed, and then gave me state-specific advice. It even helped determine which expenses were deductible in which state, which I had no idea about before.

I just wanted to follow up after trying taxr.ai for my multi-state tax situation. I was initially skeptical (as you could see in my previous comment), but it actually solved several issues that TurboTax was giving me errors about. The tool clearly explained how my home state would give me credit for taxes paid to my work state and calculated exactly how much I was owed. It even identified a special deduction I qualified for because of my temporary work assignment that I would have completely missed! Definitely made the whole process less stressful and probably saved me from making some expensive mistakes.

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Something important that nobody has mentioned yet - make sure you check if California has a minimum filing requirement based on income. Some states require you to file a return even if you only earned a small amount there. With $12,800 from your internship, you're definitely over California's threshold, but this is good to know for anyone else reading who might have worked in a state for just a short time or earned less. Also, don't forget to check if your college state (Arizona) has any special provisions for students working out of state temporarily!

Has anyone dealt with California's "doing business in California" rules? I've heard horror stories about people who worked there briefly getting hit with the $800 minimum franchise tax because California claimed they were "doing business" in the state.

One thing to keep in mind is timing - make sure you file your California nonresident return (Form 540NR) before your Arizona resident return. This is important because you'll need the exact amount of California taxes you paid (from your completed CA return) to claim the proper credit on your Arizona return. Also, double-check that your employer correctly reported your California wages on your W-2. Sometimes companies mess up the state allocation, especially for temporary workers. Box 16 should show your California wages ($12,800) and Box 17 should show "CA" with the state tax withheld in Box 17. If you find any errors on your W-2, contact your employer's payroll department immediately to get a corrected W-2C. It's much easier to fix this now than to deal with amended returns later!

Great advice from everyone here! I went through a similar situation last year (Nevada resident with internship in Oregon), and I wanted to add a few practical tips that helped me: 1. Keep detailed records of your work dates and location - I created a simple spreadsheet tracking which days I worked in California vs any remote work days from Arizona. This was super helpful when filling out the forms. 2. Don't panic about the "double taxation" - it sounds scary but the credit system really does work. I actually got a small refund from Oregon even though I was worried about owing money. 3. File early if possible! Multi-state returns can take longer to process, and if there are any issues, you'll want time to resolve them before the deadline. 4. Consider the standard deduction differences between states - California's standard deduction might be different from Arizona's, which could affect your overall tax situation. One last thing - if you had any moving expenses related to your internship (even temporary housing), keep those receipts. While the federal moving expense deduction was eliminated for most people, some states still allow it for temporary work assignments. Good luck with your returns!

Just wanted to share my experience since I went through almost the exact same situation last year - Arizona resident with a summer internship in California earning about $13,500. The advice here is spot-on, but I'll add a few things that caught me off guard: First, California's nonresident return (540NR) was actually pretty straightforward once I got started. The tricky part was making sure I only reported the income I earned while physically present in California. Since you mentioned earning $12,800 over three months, that should all be California-sourced income. Second, Arizona's credit for taxes paid to other states worked exactly as described - I used Form 301 (Credit for Tax Paid to Another State) along with my Form 140. Just make sure you have your completed California return handy because you'll need those exact numbers. One thing nobody mentioned - if you're still claimed as a dependent by your parents, make sure they don't accidentally claim your internship income on their return. I had to file an amended return because my parents' tax preparer included my W-2 with theirs by mistake. Also, start gathering your documents now if you haven't already. You'll need your W-2 showing California wages and withholding, and if you moved to California temporarily, keep any lease agreements or receipts that show your temporary residency status. The whole process took me about 2 hours using TurboTax, and I actually got refunds from both states because they had over-withheld. Don't stress too much - the system really does work to prevent double taxation!