I file state tax forms in DE (resident), NJ, MD, PA (non-resident) due to taxes being withheld for each of those states by my main employer. My small business (LLC)operates only in DE. There is no income/loss attributable to the other three states, however, my MD tax is being affected by DE LLC filing. Is there a way to show that this income is only earned in DE so that it is not taxed?
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Yes there is, provided that you have 0 income that is taxable in MD. Maryland has reciprocal arrangements with a number of states (Delaware is not one of those states). As such, they have an arrangement when a resident in one of those states has taxes mistakenly withheld to Maryland by their employer. Although Delaware does not have this same reciprocal agreement, you can use the same technique to have Maryland income tax refunded to you. Note the following on the Maryland nonresident return:
You will go through a number of screens asking for information such as residency, county you worked in, etc. You eventually get to a screen that states Here's the income that Maryland handles differently. At the bottom, click Done with income. The next screen asks about Maryland Wage Income. In the box "Wages From Maryland Sources" type in a zero. You will then get a refund for all Maryland taxes you had withheld.
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