Question

Nonresident Maryland taxes withheld

Forum|Forum|6 years ago
April 10, 2020
3 replies
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I live in the state of California but did some work for an organization in MD in 2019, resulting in income of about $30,000. MD taxes were withheld in error (according to my employer) and I should be able to get them refunded. However, the income does show up on the W-2 as Maryland income and TurboTax shows that I owe another $800 to MD. I filed all taxes a month ago before I found out about this issue.

After reaching out to the tax collection agency in MD, they sent me the following:

You can file Non- Resident form 505. File to obtain a refund of the withholding. Complete all of the information at the top of the form through the filing status, residence information and exemption areas. Check the box provided to the right of the residence information for you to indicate your withholding was withheld in error. Enter your federal adjusted gross income on line 17 in both columns 1 and 3 and line 24. Then complete lines 43-47, 49 and 51. Sign the return and attach withholding statements (Forms W-2 and/or 1099) showing the Maryland tax withheld equal to the refund you are claiming. Your return is then complete. You must file within three years of the original due date to receive any refund.

Can I do that through TT? I see that it did create a 505 for me in my filing. I do not see a way to check the box "taxes withheld in error."

TurboTax Self Employed Online

B

BillM223

First, I would have assumed that you already filed a nonresident Maryland return, or else how did you know that you owed Maryland $800? If you indicated that you were not a resident of Maryland, TurboTax should have automatically chosen form 505.

Second, look at the Maryland return that you have and see if the state withholding from the W-2 appears on the return. It should be on line 43 on form 505.

Third, the suggestion that you can get your withholding back is misleading. Generally, you owe tax in the state where you live and in any states where you worked. This means that when you reported the income in Maryland, that form 505 would calculate the tax owed on that income and apply your Maryland withholding to it.

The person from the state who told you that you could get your withholding back almost certainly assumed that you didn't have any taxable income in Maryland, but you apparently did.

"MD taxes were withheld in error"

Fourth, your employer may not have intended to withhold for Maryland, but they did and it's just as well that they did since you apparently owe Maryland tax.

The only way you can get such "mistaken" withholding back is by filing a state tax return (as the state told you) because the employer has already sent the withholdings to the state and the employer can't get it back from the state.

So, look to see if you already have form 505 and if the withholding is on line 43 of the 505 and if your Maryland state income is about $30,000 and if your withholding for Maryland is about $800 short of the tax due. If so, your Maryland return is correct.

Now look at your California return. Is there a Schedule S showing your Maryland income and the tax paid to Maryland? This should carry over to Schedule P and then for form 540. If this is the case, your return is likely correct. If there is no credit for taxes paid other state (which is what Schedule S is, among other things), then try to remember: did you enter CA first or MD? In most cases, you should enter your nonresident state first so that the tax can be calculated and carried back to your state of residence.

OK, let me know what you find.

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D

dbinbreaAuthor

Thanks for this detailed feedback. I went through the steps you discussed and it appears that TT did everything exactly as you said. I went and read the instructions for Maryland form 505 and 505NR and it appears all was calculated properly. So...my employer gave me bad information I guess. This all originally started when I wanted to raise the amount of MD taxes withheld for 2020 so I would not have to pay an underpayment penalty. It is when I asked them about changing my withholdings that they wrote back "In addition, I wanted to add a little more information that may assist you. If you live and work outside the state of Maryland, typically you would not owe taxes to Maryland (unless there is an old/outstanding tax debt, you lived in Maryland for a partial year, etc.)."

So I guess I need to circle back with them and increase my withholdings, as originally planned.

Thanks again.

Dave

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dbinbreaAuthor

And a bit more information. I was just re-reading my email back from the Comptroller of MD and they stated the following: "You need to let your employer know you live in California and they should be withholding taxes to California not the Maryland." So this just adds to my confusion.

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Donnastaxes2022

Can I fill maryland form 505 through turbtax and file

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Donnastaxes2022

I live in West Virginia not Maryland but I work in Maryland. They withheld md taxes and also west virginia. how do i fill out form 505 for maryland

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MayaD

Maryland and West Virginia have a reciprocal agreement, and you only pay tax on your wages in your home state. Your wages are not subject to MD income tax.

First make sure you've filled out the Personal Info section correctly:

With your return open, select My Info in the left-hand menu.
Then, on the Personal info summary screen, scroll down to Other State Income, and select Edit.
At the Did you make money in any other states? question, answer Yes and make sure your nonresident state(s) are selected from the drop-down.
Select Continue to return to your Personal info summary.

On the state return:

Select the long form (if the option is available) even if TurboTax defaults to the short form.
Only report the income attributable to the nonresident state.
If preparing a nonresident return solely to recover erroneous tax withholdings, enter 0 on the screen that asks for the amount of income earned in that state. This will eliminate your tax liability for that state, resulting in a full refund.
Since you live in a Reciprocal states , consider submitting an exemption form to your employer so you don't have to file a nonresident return next year.

Always file the non-resident state return first.

How do I file a nonresident state return?

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