I moved to Maryland from DC in June but forgot to change my withholding to Maryland until November... How should I file my taxes?

[skim205]

My W-2 reflects that I only withheld Maryland taxes from November on... whereas it reflects DC taxes being withheld from January through November. Do I just say that I lived in DC till November?

[DanielV01 · Accepted solution]

It depends.  If you did it that way, it certainly would be easier for you from a logistical point of view, and it's quite likely that neither MD nor DC would be overly concerned about it.  (If you were a full-year resident, the reciprocal agreement would be in place so they already agree that you are taxed where you live not where you work).  

Technically speaking, however, the more accurate way to report is to find out the amount of income that should have been reported to Maryland and then allocate, or designate, the correct amounts to each state based on the correct move dates.  This method does take a bit more work:  research on how much you earned between the two taxing districts, the correct place in the program to enter the information to adjust the income, as well as the hassle of waiting on DC to send a larger refund so that you can pay Maryland the amount due.  More work to be sure, and it is possible that either or both taxing districts would want proof as to why you are adjusting the amount.  More accurate, possibly better overall tax result, but considerably more work.

In the end, the less accurate way (report to MD and DC as the income and taxes are reported to you) may also be the less questioned way.  But, you have to choose the way you feel is the right way based on these two options.

[skim205]

So if I report as is on my W2, would the states actually check? If so, would there be a penalty of some sort? My tax situation is otherwise very simple and I am just taking the standard deduction.

[DanielV01]

They could ask either way.  But truth be told, they are less likely to ask if you were to report as reported to you on the W-2, because those are the reported numbers.  I can't recommend that course of action because it's not technically accurate, but it's what each district is already seeing by what your employer filed to them.  The only way to fix this without question is if your employer can send MD and DC corrected W-2s showing the same withholdings (since those amounts were the amounts sent to the individual taxing districts), but yes correcting the taxable income based on your move date.  If they can't or won't do that, however, then you are faced with the decision:  Harder road (and even more likely to be questioned) but the most accurate way, or the less accurate but easier path.