I live in Maryland, but work in D.C. My employer withheld local (D.C) taxes instead of Maryland taxes, am I liable for the underpayment penalty?

[stlinman]

More than 90% of my income was taxed by D.C however the  D.C. tax is less than my local tax in MD.

[TomD8]

You can submit DC Form D-40B to get a refund of your withheld DC taxes.  Here's a link:  https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/2016%20D-40B%201.06....

And, if you haven't done so already, you should submit DC Form D-4A to your employer.  Here's a link to that:  https://www.bea.gov/jobs/new_employees/docs/D-4A_Certificate_of_Nonresidence.pdf

The only published exceptions to the underpayment penalty in Maryland are:

1. The tax liability on gross income after deducting Maryland withholding is $500 or less; or

2.  You have made four quarterly payments as required, each equal to or more than one-fourth of 110% of last year’s taxes.