Q: I took a hardship withdrawal from my 401K while living in TX.
I moved to CA in the same year but after receipt of the money. Do I have to pay tax on the withdrawal to CA?
I am being audited from CA for 2015
A: IMPO you should not rely upon free online advice when the issue involves potential tax liability. Contact a tax lawyer in California and ask them to help you.
A: See California FTB publication 1031. That manual describes the residency rules for CA, what income is subject to tax for both residents, nonresidents, and part year residents. You can look at the examples for lump sum distributions from qualified plans, with a focus on the timing of receipt relative to residency status at that time. The FTB is aggressive, so push back. Hire a qualified CA attorney if the audit adjustment is material to you. Good luck.
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