How best to file taxes for 2020 when we have changed our residence to DE, but have state tax withheld from retirement by VA and MD? We Want to file in DE

[WilmaandRick]

My wife and I bought a home in Delaware and changed our driver's licenses, car registration, voter registration over to Delaware.

However, We did not pay into any Delaware state taxes, but do have retirement annuity income that is direct deposited.

We both received 1099-R Tax statements that show there was state tax paid to VA and MD.

What is the best route to go to file for 2020?

Do we get the state taxes filed in other states refunded in order to pay DE state taxes?

Please advise the best way to approach the 2020 tax dilemma?

Thanks so very much.

V/r

WilmaandRick

[MaryK4]

You will have to file Part Year resident returns for Delaware and your former state of residence.  You only have to pay retirement income in your state of residence so you will have to calculate how much you received while you were living in each state.  You can use a percentage based on time for the year.  

If you were not a resident of Virginia and/or Maryland, you will have to file a nonresident tax return with no state income to get the withholding return.

Also, if you have not already done so, make sure the correct state withholding is updated with your annuity.  Even if you have direct deposit you always want to update your address on financial accounts.

[WilmaandRick]

I have changed the address of my IRA when I received my 1099-R  for 2020 so as to reflect my Delaware address for the current upcoming 2021 tax year.

Thank you so very much for this reminder.

QUESTION - If income from our IRAs shows there were state withholding taxes paid into either Maryland or Virginia, how would, or could these withholding tax amounts be redirected in order to put these monies towards any Delaware state taxes that might be owed?

You had mentioned applying a percentage based on time of year if we lived in the other states (Maryland or Virginia) for part of the 2020 tax year.

Could you please elaborate just a little bit more on this concept?

Also, I lived in Delaware last year and voted and all, but my wife remained in Maryland for part of last year in comparison to my staying in Delaware for the year.

So, that would mean I would have to file a "part-year resident" for my wife in Maryland and a "nonresident" return for me in Virginia?

Would my wife then also be considered a part-time or "part-year" resident of Delaware?

Sorry to ask so many questions of you, but I have never done this before and want to make sure that I get it right so that there is no pending conflict with any state who was paid a withholding tax amount that I am basically not going to pay them, but instead be able to apply those same tax withheld monies to the state of Delaware where I had not had any 2020 withholding taxes paid.  This because I am assuming I am going to end up paying Delaware state some amount in taxes?

Thank you again for all your time and attention, very much appreciated!

[AmyC]

DE will give you a credit for taxes paid to other states. At some point, you both got licenses, bought a home and established the intention of having DE for your home. The time your wife spent in MD finishing up the move is incidental. If you established your DE residence in 2019, you could both be full year DE residents.

Although, MD part year residents with MD nonresident income file the nonresident return in addition to the resident return. Not sure where she fits in that.

The best way to file might be VA nonresident, MD 505 nonresident and prepare those two returns first. Then prepare your final DE resident return.

If your wife was a part year resident of MD, had not established intent to move, then file a MD part year return for her. MD would tax just the MD money.

File  VA nonresident and then create the DE full year with a tax credit for VA  tax paid.

[SCurling1]

I finished my 202o federal taxes.  I lived in two states during 2020, Va for 5 months, then moved permanently to NC.

NC state taxes were processed with no issues.

TbTx says "follow this link" for step-by-step-instructions on how to file Va state taxes using Married-filing-separate.

The link takes me to the TbTx help section.

I'm not finding those step-by-step instructions.

[TomD8]

@SCurling1

Did you file a joint federal return?  If you did, VA requires you to file your VA return either jointly, or by using VA's special Filing Status 4, "Filing Separately on a Combined Return."

If you filed a joint federal return, VA does not permit you to file as "Married, Filing a Separate Return."

You'll find the details on VA's requirements here:

https://www.tax.virginia.gov/filing-status

[SCurling1]

Tom:

Thanks for the help.

I haven't filed any 2020 tax returns yet.  I have extensions on the Federal and two states (VA & NC).  All taxes have been paid, I just need to get the returns completed and mailed.

I'm getting the same support info from you and one other in community.

The other response I received from  TbTx , was to use two mock Federal returns prepared as MFS, then use those to prepare two MFS separate returns for the VA state return.

My dilemma:  when I finish my Joint (MFJ) federal return, TBTx will not allow me to access the VA state return.  It says, I must file a federal separate (MFS) return.  TBTX seems to be ignorant of the VA  Filing Status 4.

Am I misunderstanding the TbTx program or do I need to create at least one mock Federal returns (MFS) to access the VA return where I will be able to complete the state return filing status 4.

I'm not sure of the mechanics within the TbTx process.

[SCurling1]

Tom:

I read through the VA filing status requirements.... a few times, and think I understand now.  Another issue with the year 2020:  I was a part time resident in VA, but my wife was not.  We were in transition, moving  from VA to NC, and I was still working in VA part of the year.

Any additional help you may have is appreciated.

[TomD8]

The key to getting TT to produce the correct state tax forms is to carefully and correctly answer the state residency questions in the My Info section of the program - both for you and for your spouse.  

[SCurling1]

Thanks for your assistance.