Actually, your problem isn't all that difficult to solve. You have two choices. Either you claim to be a part-year resident of CA and a part-year resident of AZ, or you are a full year resident of AZ with out-of-state earnings in CA.If you choose the latter, you report all your income to the federal government. You then complete your CA non-resident return, reporting $2.5K of CA income since that is what your employer is reporting to CA that you earned there. I'm not familiar with the CA non-resident return, but there are two common ways to determine your NR tax, (1) based on income earned in-state or (2) based on all income earned everywhere times the ratio of in-state income to total income. Method (2) produces a higher tax and is used in NY and NJ (the two states I am most familiar with). Finally, you complete your AZ return, reporting all your income earned everywhere. AZ probably will give you a credit against your income tax for part or all of the tax you paid to CA. Look carefully, because the credit may be on a different form.Ira
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