DC Taxes Witheld, Live in MD / Estimated Tax Penalty

[radiomike10]

I live in Maryland and work in DC, and realized I paid income taxes all year to DC.  I'm trying to figure out the best way to handle my Maryland filing through Turbotax:

• Do I fill out a 502CR?  Turbotax says I can't enter credits based on income from working in DC.  
• I'm being assessed a hefty estimated tax payment penalty with the information provided.  Do I avoid paying this by indicating I worked in another state (DC) in Turbotax? I was otherwise planning on completing a D-40B form to recieve a refund from DC. 

Help!

[DianeW777]

Maryland (MD) will have a balance due because it is a reciprocal state for DC. You will file the DC return to receive a full refund of any state tax withheld there, because none of your income is taxable to DC.

MD will tax all of your income because you are a full year resident. The balance due penalty will not be removed however, you could ask if they would relieve it because you were unaware of the situation once your return has been filed and accepted.  There are no guarantees because the reciprocal status is very common.

• Reciprocal rules apply only to wages.

When you file the state returns, you will be asked about reciprocal agreements on both. Be sure to select MD as resident and DC as nonresident.