MD state tax withholding question
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dwb4997
Level 1

MD state tax withholding question

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? 
 
5 Replies
ErnieS0
Employee Tax Expert

MD state tax withholding question

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
Level 1

MD state tax withholding question

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
Employee Tax Expert

MD state tax withholding question

@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.

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dwb4997
Level 1

MD state tax withholding question

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
Employee Tax Expert

MD state tax withholding question

You would probably not pay Maryland non-resident income tax if you were reassigned to your companys permanent Florida office. These questions are facts and circumstance based and I dont 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.

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