You will want to file a form with your employer for the withholding to be correct. See Which states have reciprocal agreements? for the correct form and instructions.
As for 2023, you will need to file both state taxes. Since you are being hit with penalties in VA, let's go another route. You will file the MD nonresident return with your MD income and then take a credit against VA for taxes already paid to another state. This should eliminate the penalty.
You will need to complete the MD return first for the tax liability to carry over to VA to be used as a credit.
You get credit for the lower state tax on the lowest taxable amount.
- Each state calculates taxable income differently.
- Each state has its own tax rate/ system.
- You get the lowest of both categories as a tax credit.
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