California Foreign Income Tax Safe Harbor 546 day period question

[andykat]

For the next year, I am in Singapore under employment for a foreign firm from 7/31/2019 to 12/31/2020 which is 526 days, but safe harbor only applies to at least 546 days. If I was outside of California before 7/31/2019 on vacation in different countries, or if I am continuing to stay in Singapore for 2021, can any of these days count for Safe Harbor when filing 2020 taxes? Thanks for the help.

[KarenJ2 · Accepted solution]

Unfortunately, you can not extend it with a vacation or even another contract.  The contract must be over 18 months.  California FTB as you know, is extremely aggressive.

The employment contract has to meet the time period on its face; it can’t do so via renewals.  Nor does a series of separate contracts, even with the same employer, adding up to 18 months suffice.

The Safe Harbor Rule : Safe harbor is available for certain individuals leaving California under employment-related contracts. The safe harbor provides that an individual domiciled in California who is outside California under an employment-related contract for an uninterrupted period of at least 546 consecutive days will be considered a nonresident unless any of the following is met:

• The individual has intangible income exceeding $200,000 in any taxable year during which the employment-related contract is in effect

• The principal purpose of the absence from California is to avoid personal income

[andykat]

Thanks KarenJ2.

I am an employee of the foreign company, so my employment contract does not have a time period. I just wanted to clarify, if by the time I file taxes in April 2021, I will have stayed in a foreign country longer than 564 days. I just want to know if the days beyond December 31, 2020 count toward Safe Harbor on the 2020 Tax Return.

[MaryK4]

Yes  the days beyond 12/31/20 do count for the 564 time period- it essentially is a sliding scale so you can use any start or stop dates that contain the required 564.

@andykat

[Anonymous]

I am a California Resident US Citizen that moved to Belgium April 2019 for an employment contract of several years.  Can I file CA taxes under Safe Harbor now or do I have to wait until it has been 546 days (Oct2020)?  Will the Safe Harbor allow me to get back all CA SDI I paid (1% up to 115K)?

[KarenJ2]

You do not have to wait until all the conditions under the safe harbor rule are satisfied before filing a return.  There must, however, be a realistic expectation that all the conditions will be met from the get-go.

For the purpose of the safe harbor rule, presence of no more than 45 days in CA during any calendar year covered by the employment-related contract would be considered temporary and not interrupt the 546-day period

There is nothing special you'd need to do on the CA return with respect to the safe harbor rule.  If the taxpayer (and the spouse) is/are to be treated as part-year resident(s) for 2019, they will only need to file CA-540NR with a Schedule CA (540NR) to report their period(s) of residency, days spent in CA, etc. along with income earned within and without CA.

If you paid excess CA SDI due to 2 employers during 2019, then California return in TurboTax should compute the credit for you.

Safe harbor

If you’re domiciled in California but are outside of California under an employment-related contract, you may qualify as a nonresident under safe harbor.

Visit FTB Publication 1031PDF Download for more information.