Anyone know if students need to file a California state tax return for work study income earned at USC if they are not California residents? I googled and found a California State web site, but found it too confusing so I thought I'd ask the experts on CC!
Alamemom, I tried to PM you, but your box is full!
Sorry about that - and I haven't had a chance to slog through the accumulation of PMs yet, so it is still full!
Hmmm... We live in California, so this is a question I have not had a need tomconsider - we just automatically do the California State return because that is where we live and where our student lives while at college. I would think you would do your return in your state of residence, and in most cases that would probably be where your parents live. Work/study is very likely under the amount that would be taxed, so in most cases it would be advantageous to file - you can get any income tax withheld from your pay back as a refund.
Check with your parents and their tax advisor or call the online help line if you are using one of the tax-filing software programs.
USC withheld nothing. S owes federal taxes because his summer earnings at home + work study income + grants/scholarships beyond qualified expenses put him over the limit. Now I am wondering if California will want to tax the grant/scholarship portion since he received it in California.
Each "portion" of his income is below the threshold for filing, but combined total triggers federal tax.
Is there anyone on Campus to help students with their taxes?
I don't know if they have tax advice on campus - that would be very useful! Have you tried a search of the USC website?
I am still thinking he would file in his state of residence. You could try the IRS help line.
An unrelated bright note is that USC will not consider his work/study income in 2011 when they calculate next year's aid - since it was aid for the current year it is excluded from the following year's calculations.
Thanks. So you are saying the state of California will tax the work study income. What about the grant/scholarship amount? He "received" it in California, but the excess amount could be considered federal funds (Pell.) I understand the state really needs money, but this doesn't seem very fair. And they have no claim on the money he earned in his home state, right?
I am also confused where it asks if he can be claimed on someone else's return. We claim him on our federal return, but we do not live in California or files there, so no one can claim him on California taxes.
The general rule is if you earned income in a state, you generate a filing obligation in that state only on the income that was earned/sourced in that state.
And yes, you wouldn't report the California earned income on your resident state tax return based on my explanation in the previous statement.
You only need to report as income whatever is mailed to you (W2/1099). I don't think grants/scholarships are taxable. You'll have to research that. Taxing a grant would be the equivalent of taxing food stamps.
Also look at the 540NR instructions for the dependency claim question. Should be explained there.
^ Grants and scholarships that exceed qualified expenses (per the 1098-T) are subject to income taxes - but only the amount that exceeds the qualified expenses is taxed.
I am not sure where you would put the excess scholarship and grant amounts - as I said, we are California residents, so in our case they go on daughter's Federal return and then on the California state return in the same amount. With the explanation moss gave, it would seem they would go on your son's California return.