My wife and I are residents of Delaware but my wife works in Maryland. Her Maryland employer says that Maryland does not have reciprocity with Delaware so they withhold Maryland Taxes on her income but no Delaware tax. When we file our taxes, all of the Maryland taxes that were withheld are refunded, but then we owe a substantial amount for Delaware income tax on that income and the Maryland tax refund is subject to federal tax in the next tax year. Is there a better way of handling this so we don't have this issue at tax time? It seems silly to have Maryland tax withheld just to have it all refunded at tax time and then owe Delaware taxes since there was none withheld throughout the year.
