MD state tax withholding question

[dwb4997]

I am resident of Florida. I graduated college in May 2020. I accepted a full time position with a company located in Maryland outside DC. I was to relocate to the DC Metro area for my position and in the initial stages of my hiring the company setup my HR profile based on the premise that I would be working in the MD location.

With Covid, the company had all employees work from home and told me I would begin my employment from my residence in Florida. Since June, I have been residing and working remotely from my FL residence and I have not moved to Maryland due to Covid and the distribution of the vaccine. 

Based on the above situation (which I understand is not unique to me):  1) was it correct or incorrect to have MD state income tax withheld? 2) should I have updated my state tax withholding back in June/July 2020 with the company to reflect the state of Florida wage tax withholding instead of the state of Maryland due to not being a resident of Maryland during all of 2020? ) should I update my 2021 state tax withholding with the company to reflect the state of Florida wage tax withholding and change it to the state of Maryland once I become a resident of Maryland sometime in 2021?  

Although I am a resident of FL my work location is in MD but I am not sure if I should have had MD state tax withheld from my wages or not (since June 15th through today the MD state tax has been withheld)? If the MD state tax should not have been withheld then what do I need to do to amend and correct? Or if MD state tax was correctly withheld, could you explain why? and if so, how do I file a MD state tax return? 

[ErnieS0]

Maryland tax was correctly withheld from your pay because you were hired on the assumption that you would be a Maryland-based employee, but are temporarily working remotely due to the pandemic.

The Comptroller of Maryland issued guidance that Maryland withholding requirements are not affected by the shift from working in an office to teleworking for Maryland employees.

Generally, Maryland imposes income tax, and therefore a withholding requirement on employers, for employees living in Maryland and on non-residents receiving Maryland-sourced income. Income is deemed Maryland-sourced income when the income is compensation for services performed in

Maryland.

See EMPLOYER WITHHOLDING REQUIREMENTS FOR TELEWORKING EMPLOYEES DURING THE COVID-19 EMERGENCY

File a non-resident Maryland income tax return with TurboTax. To learn more see How do I file a nonresident state return?

[dwb4997]

Just a followup:  so even though I am teleworking from FL and have been since beginning my employment, the work I perform is considered to be as if I was working in the state of MD since that is my work location and therefore I have to pay the MD state tax, but as a non-resident since I do not actually live in the state? 

[ThomasM125]

@dwb4997 You are correct, since you are teleworking for a Maryland based company, your income is considered ""Maryland-based", so you would file a non-resident tax return. However, this is a temporary regulation based on the emergency declaration in Maryland, so you should review the requirement going forward, as your income would not normally be taxable in Maryland if you don't work there.

[dwb4997]

A quick follow up to the most recent response for which I am thankful.  It got me thinking about these 2 questions:

Does it change my current 2021 and or 2020 tax situation at all if the company that I work for has other full time employees working at a permanent company office in FL?  They are full time residents of FL (like me), but  their positions have always at the FL office location, even prior to Covid, but does this make a difference for me now?  Would the company have to change my actual work position to the FL location in order to discontinue the necessity of the state of MD tax withholding?

On the topic of the MD Governor's emergency order, if he were to lift that in the future, but I did not return to work because the company was not ready to have employees come back to the MD work site, would that be a scenario under which I would consider changing my withholding to the state of FL, under such time as I was told to report to the MD work location, since I am actually not "working" in MD?

[ErnieS0]

You would probably not pay Maryland non-resident income tax if you were reassigned to your company’s permanent Florida office. These questions are facts and circumstance based and I don’t know how your Florida employees are taxed. I assume your company considers employees who work or telework out of the Florida office to be Florida-based rather than Maryland-based so they are probably not paying Maryland income tax.

Take to HR. See if they can “transfer” you to the Florida office. You can also speak to them about what would happen if you were to stay in Florida as a teleworker but are still reporting to the Maryland office.

[alandvic]

@ErnieS0, @ThomasM125 

Was I supposed to be taxed in MD if I am a MA resident and was hired for an internship in MD that was fully remote due to COVID? I would not have taken this position if I had to relocate. The internship started and ended in 2020 and was fully remote for all participants.  The company did withhold MD taxes, and another expert on this forum stated that I should claim 0 MD income and get a full refund. Based on your previous answers here, I am no longer sure.

Accordind to MD tax alert, "Maryland employer withholding requirements are not affected by the current shift from working on the employer’s premises to teleworking because taxability is determined by the employee’s
physical presence. " On ther other hand, they also say, " Compensation paid to a Maryland nonresident
who is teleworking in Maryland is Maryland-sourced income, and therefore, subject to
withholding. ". It looks like a contradiction to me. If taxability is determined by the employee's physical presence, I should only be taxed in MA. But if it is indeed a Maryland-sourced income, I should be taxed in MD. I am totally lost. Please help! 

[BillM223]

"Compensation paid to a Maryland nonresident who is teleworking in Maryland is Maryland-sourced income, and therefore, subject to withholding. "

No, it just appears to be a contradiction but it's not.

What this phrase ("who is teleworking in Maryland ") means is that an otherwise nonresident of Maryland relocated to Maryland to physically work in MD (e.g. to a relative's house).

Since the telecommuter is physically working in Maryland, this is Maryland source income even though he/she is for tax purposes a nonresident..

[alandvic]

@BillM223 

Thank you for your answer.  So you agree that I should not be paying MD taxes since I telecommuted from MA? But that still contradicts what other experts said above. 

[BillM223]

The other experts were not addressing the same situation.

As you correctly noted, normally physical location determines where your wages are taxed (except for NY and sometimes CA). However, special rules have been thrown into the mix for people who are now working their old jobs in one state but who are doing it remotely from another state.

Please show me where one of the experts above described your situation and gave a different answer.

[ErnieS0]

@alandvic You should discuss your withholding with your payroll department. 

In your initial post you say, "I was to relocate to the DC Metro area for my position and in the initial stages of my hiring the company setup my HR profile based on the premise that I would be working in the MD location."

In your other post you say, "I would not have taken this position if I had to relocate. The internship started and ended in 2020 and was fully remote for all participants."

Those are different circumstances.

[alandvic]

@BillM223 

How is the situation that Ernie and Thomas addressed is different from mine? 

[alandvic]

@ErnieS0,

The original posting was not mine. I was not planning to relocate. I only took this position because it was possible to do it remotely due to COVID.

[ErnieS0]

Hi @alandvic. Sorry. I misread your post. Your income is non-Maryland and you should not pay MD tax if you were never supposed to work in Maryland.

There is no contraction in the two statements you included in your original post. Maryland is saying employees who usually work in MD but now from home in another state remain Maryland employees, i.e. "not affected by the current shift from working on the employer’s premises to teleworking."

The second statement says a teleworker working in MD pays MD tax: "Compensation paid to a Maryland nonresident who is teleworking in Maryland is Maryland-sourced income."

You are teleworking from MA so you do not have MD income. The MD Tax Alert further says, "Income is deemed Maryland- sourced income when the income is compensation for services performed in Maryland."

In the previous situation, the person was hired with the intent of working in Maryland but worked remotely due to COVID, i.e. the work arrangement was "not affected by the current shift from working on the employer’s premises to teleworking."

EMPLOYER WITHHOLDING REQUIREMENTS FOR TELEWORKING EMPLOYEES DURING THE COVID-19 EMERGENCY