Living in MD and working in NY

[Taxes36]

Living and working remotely in MD for a NY based company, if tax is withheld in NY (which has a higher rate), what would the protocol be for filing taxes?

A) Which forms would I need to fill out?

B) Will I receive a total refund from NY?

C) Will I need to pay taxes at the MD or NY rate?

Thank you!

[Anonymous_]

@Critter-3 

[TomD8]

If you as a non-resident of NY never physically work within NY - not even for a day - then your income from that work is not taxable by NY, and your employer is not obligated to and should not withhold NY taxes.  But if they do anyway, you'll have to file a non-resident NY tax return on which you allocate zero income to NY, in order to receive a refund of those withholdings.

As a resident of MD, your income is 100% taxable by MD, regardless of its source.  So ideally, your employer will withhold MD taxes for you.  If they don't, you will have to make quarterly estimated tax payments to MD.

If you do travel to NY and do any work from a NY location, then that portion of your income would be taxable by NY.

[Taxes36]

Thank you!

Can the MD taxes just be paid in one sum at the end of the year?

[TomD8]

Q:   "Can the MD taxes just be paid in one sum at the end of the year?"

A:  By doing so, you would risk being assessed interest and penalties for late filing.  Estimated payments are due quarterly.  Here is the text of the applicable Maryland law (in particular, see section (4)(a):

https://casetext.com/regulation/maryland-administrative-code/title-03-comptroller-of-the-treasury/su...

[Taxes36]

Would it make sense that taxes are paid to the state of NY and then MD gives a credit for what was paid to NY? Also, does that mean that it's at a disadvantage since income tax is less in MD than NY so if you work for a company based in MD, you're better off?

[AmyC]

1. Yes, if you owe taxes in a nonresident state, your resident state will give you a credit for the lower state tax on the same income.

2. Yes, you would be paying extra on the NY income. Therefore, if you could make the same money with a state resident company, you would come out ahead.

[Taxes36]

Above it's stated that if you didn't physically work in NY, you would receive a refund from the state of NY. Now, it doesn't seem that way and it would just be a credit toward MD Taxes? Shouldn't I receive a refund for the difference of how much NY charges and how much MD would charge since I'm a resident in MD?

Also, is this specific to the state of NY? Do other states allow you to pay your resident's state tax directly?

[swanky3]

TurboTax tip: do the non-resident state return first. This calculates the non-resident state tax so you can enter it as a credit on the resident return.

[SharonD007]

No, you would not receive a refund from New York for the difference, but you would receive a credit for taxes paid on your Maryland tax return. You may receive a refund on your Maryland tax return based on your tax liability to Maryland. 

If you lived and worked in reciprocal states then you could have your employer only take out taxes for your state but Maryland and New York do not have reciprocal agreements. Please review the TurboTax article Which states have reciprocal agreements? take out taxes for your state but New York and Maryland do not have reciprocal agreements. 

Please review the TurboTax article Multiple States - Figuring What's Owed When You Live and Work in More Than One State for additional information.

[Taxes36]

So essentially I pay taxes to the state of NY at the income tax rate of NY? Above, someone else stated I would file a return with NY, receive a refund, and pay taxes to MD. Here, it's being established that I'm paying taxes to NY and then MD will give a credit so I don't have to pay taxes twice?

And if the tax rate is higher in NY than MD, I am paying more taxes even though I never worked there?

[TomD8]

@Taxes36 --

It works like this:

1.  If you're a resident of MD, all your income is taxable by MD, regardless of where you earned it.  And it's taxed at MD's tax rate.

2.  If you as an MD resident never physically worked in New York, then your income is not taxable by New York.  If your employer mistakenly withheld NY taxes, NY will refund them to you.  NY will not "credit" MD.

Hope this clears it up.

[Taxes36]

@TomD8 Thanks but it seems like everyone is saying something different.

"Yes, if you owe taxes in a nonresident state, your resident state will give you a credit for the lower state tax on the same income.

2. Yes, you would be paying extra on the NY income. Therefore, if you could make the same money with a state resident company, you would come out ahead."

This is not what you seem to be saying. It seems to be that MD and NY are not reciprocal states so therefore I need to pay taxes to NY even if I don't live there and haven't physically worked there. 

[TomD8]

"Yes, if you owe taxes in a nonresident state, your resident state will give you a credit for the lower state tax on the same income."

If you never physically worked in New York, then you don't "owe taxes in a non-resident state".  Hence you don't get a credit; you get a refund.

[Taxes36]

That seems to be the case for a reciprocal state but NY and MD don't have a reciprocity agreement, so other posters made it seem that I would receive a credit towards MD and not receive a refund from NY which means that I'm paying taxes at a higher rate, as NY has a higher tax rate than MD.