Should I request my employer to withhold state tax for Maryland?

Forum|Forum|3 years ago
July 30, 2022
1 reply
30 views

I will start a new job next week. The position is remote. The company is in Maryland. I will reside in Indiana but work remotely. I am a contractor. On Friday my employer told me that they couldn't withhold the state tax for Indiana for me. I am given 2 options: 1) they don't withhold any state tax for me 2) they withhold the state tax for Maryland. For both of the options, I need to hire a professional to help me. Could anyone give me any suggestions? What should I do in my case?

How much more percentage of state tax I need to pay compared to the situation that I reside and work in Indiana? Based on the link here: https://www.marylandtaxes.gov/individual/income/tax-info/index.php

"Nonresidents are subject to a special tax rate of 2.25%, in addition to the state income tax rate."

How should I do the math?

Any suggestion is appreciated! Thank you in advance.

Best answer by TomD8

@xie186 - you are not a non-resident of Maryland..

You work and live in Indiana. Period.

A non-resident would be someone who PHYSICALLY works in Maryland (you don't) and lives in another state. Think of someone who lives in West Virginia and commutes into Maryland for their job - that would be a non-resident.

@xie186 --

I apologize for being a nitpicker, but as a resident of Indiana you definitely are a non-resident of Maryland.

The issue is that Maryland taxes non-residents only on Maryland-source income.

Work income is "sourced" where the work is actually (physically) performed. (There are a few exceptions but they are not relevant to your case.)

Since your work is actually performed in Indiana, your income from that work is Indiana-source income, and therefore not subject to Maryland state income tax.

Think of this example: Coca-Cola is headquartered in Atlanta, Georgia. But that doesn't mean that all Coca-Cola employees across the country pay Georgia state income tax. The only Coca-Cola employees who pay Georgia income tax are those who live in or physically work in Georgia.

NCperson

Level 15

@xie186 - please clarify,

Where you work is a question of the physical location - not a virtual location.

So when you state you will work 'in Maryland" - please confirm you are traveling from Indiana to Maryland each week for this position.

if you are working for a Maryland based company and physically sitting at a desk in Indiana, you are not 'working in Maryland. is that what you mean by "remote"?

also, I assume this is a W-2 position and you are not a contractor.