I reside in PA, worked (only) in MD for 6 months in 2023 from 1/1-6/7. My employer did not withhold PA state tax, only MD state tax. I questioned this multiple times but always got the same general answer of ‘Oh yea it’s fine you will get refunded all of the MD tax and you will just pay your PA state tax out of that’…mind you MD tax is a little over double what PA is.
Well after July 7 I quit and went back to my old job in PA. But as I dig into all of this I am realizing I will probably be liable for an underpayment penalty and daily interest on tax due, since no PA tax was withheld. Will I have to file a Refund of MD state tax? Or file a MD state return? I normally do my own taxes but should I get them professionally done and HOPE that they can sort this all out/get the correct forms filed?
You are correct. Since your employer did not withhold any PA taxes, you will have an underpayment penalty. Since MD taxes are more than PA taxes, you may end up covering your penalty with the refund, but you also may not. You will include all of your income on the PA return.
Yes, you will need to file a MD return in order to get your taxes back that were withheld for MD. When you do your MD nonresident return, you will say that you have no MD income, but enter the amount you had withheld for MD so you get it all back.
It is not too complicated that you would need to have someone else do your return, however, if you do need help or want someone to look over your return, we do have TurboTax live. You can do your return and get help when you need it by clicking the little chat button or you can have one of our tax experts do the return for you.
Thank you for the quick response! From using generic tax calculators, and finding out what the percentages are for the penalty, and my wages not being an extreme amount since I only worked there half the year..It doesn’t seem like the penalty will be alot @5% per month/25% max. What about the interest that I keep reading about? Underpayment interest on total tax due. If im understand that part correctly it is….unpaid tax multiplied by # of days delinquent multiplied by daily interest rate of 0.000192. In my case, I paid $3,330 in MD taxes. I should have paid $1,332 to PA. My federal tax doesn’t seem like it’s off by much, if any. No local tax was withheld either from the MD job.
I would suggest finishing your taxes as quickly as possible. Whatever penalties and interest are due at least stop accruing as soon as you file. Figuring the number of days late on taxes not withheld by an employer is very difficult since technically you owed those taxes with each pay period from the beginning of the year. Pay the taxes now and when Pennsylvania sends a letter requesting penalties or interest you'll be able to see what they calculated and decide whether you want to pay it or argue.
Well see, another issue im having is the MD employer STILL hasn’t sent me my w2. They used ADP for their payroll from 1/1-5/5. After that it was just hand written business checks - with no pay stubs. I have estimated how much I made while working there. But I have yet to receive a w2 for my wages earned from May 5 to when I left July 7. Im about to call the IRS but I really don’t want to get the company in trouble. But there are probably 25-30 other people (roughly 12 aren’t employeed there anymore) who are in the same boat as I am with still waiting on a w2. 5-6 of us are PA residents.