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Multiple State Filing - State Income Allocation (MA, MD, DC)

Forum|Forum|4 years ago
April 7, 2022
7 replies
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I lived in MA for 1/1/21 - 7/9/21 and physically moved to MD for 7/10/21 - 12/31/21.

For the entire time, I worked for an MA-based company. Due to company-specific tax policies, my company allowed me to work at a DC office and withheld my taxes in DC for 9/27/21 - 12/31/21 (prior to when state taxes were withheld in MA, despite updating my personal address with the company via Workday).

As such, I received two W-2s, where the first one includes all of my annual income (for boxes 1 - 12) and shows DC wages and taxes for boxes 15-17 relating to my wage for 9/27/21 - 12/31/21. The second W-2 just includes my MA state taxes for box 15-17 (with boxes 1 - 12 empty) in connection with my wage for 1/1/21 - 9/26/21.

I am really confused as to how to populate non-Maryland income, Massachusetts Income While Resident, and Massachusetts Income While Nonresident.

Would it be correct to populate these fields based on my W-2? - As in my MA state wage and income tax from my second W-2 gets used for Non-Maryland income AND my Massachusetts Income While Resident, with my DC state wage and income tax from my first W-2 gets used for Massachusetts Income While Nonresident.

OR should I rather calculate the allocation based on my physical time in these states? If the latter, how would I ensure that the calculations are not resulting in duplicate taxes?

Best answer by DMarkM1

1. My MA income while Resident is equal to wages from 1/1 - 7/9 during my time in MA YES

2. My MA income while Nonresident is equal to my wages from 7/10 - 9/27 (equivalent 9/13) during my time in MD but prior to changes in MA tax rule for pandemic remote work. YES

3. My income after 9/27 (9/13) is NOT considered MA income despite my company being based in MA due to the state tax rule changing as of this date. YES you are correct.

4. My non-Maryland income for my MD state filing is equal to the sum of 1&2 or entirety of my MA income through 9/27 (9/13). NO. Your non-MD income is only the amount in #1. Your MD income starts when you moved to MD 7/10. The amount in #2 is double taxed by MD and MA and you will claim a credit on your MD return for taxes paid to another state. Here are the steps:

1. Return to your MA return interview and select "Update" for the "General Info" section.

2. Verify your forms. You should be filing "Non-resident and Part-year tax return". If not, click "Change Residency" and select that category.

3. Continue to get back to the "Summary Page"

4. Select "Update" for the "Your Bottom line" category

5. Verify the "All wages" amount

6. Continue to page titled "Income Adjustments"

7. Only fill in the allocated amounts for the period you were non-resident (7/10-9/27) and put zeros in the other boxes

8. Continue through to the MA Bottom line page

9. Take note of the MA income taxable and MA Income tax amounts, you will use theses for the MD credit

10. Continue to get back to the MA summary page

11. Select "Update" for the "Your Bottom line" category

12. This time you will add the allocated amounts for the MA resident period (1/1 - 7/9); now both columns should have amounts

13. Complete the MA interview

14. Return to the MD interview

15. Edit the "Credits" category

16. Scroll down to "Taxes paid to another state"

17. "Start" and follow the prompts to get the credit for the tax on the income between 7/10 and 9/27

5. My work in DC does not impact amount in (4) as I am getting my tax refunded via DC tax filing and should pay MD tax as a resident beginning on 9/27 (9/13). Partially correct. See #4 above. Your MD residency began 7/10 and you will pay MD tax on all income from that date including the double tax time period that you will get a credit for. As you note however, there will not be double taxation by DC due to the reciprocity agreement between DC and MD that states you only pay tax in your resident state. Thus the DC taxes withheld will be refunded.

E

ErnieS0

Level 15

Yes, it is correct to populate your MA return based on your W-2s.

Massachusetts taxed remote employees who originally worked in MA but worked out of state due to the coronavirus pandemic.

That rule ended on September 13 and MA stopped taxing remote workers.

Your first paycheck after the rule changed was probably September 27, which is why your employer started withholding D.C. tax from that point.

All income until September 13 is Massachusetts Income While Nonresident. I’m assuming the difference with September 27 is that the income was earned up to September 13 and paid on September 27.

Updated FAQs available on non-resident telecommuting and 830 CMR 62.5A.3: Massachusetts Source Income of Non-Residents Telecommuting due to the COVID-19 Pandemic

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R

ryankhkimAuthor

Level 3

Thank you for your clarification on MA tax laws in connection with the pandemic.

Based on this MA state tax law and your clarification, could you confirm the below entry would be accurate based on my physical move date (7/10 moved from MA to MD)?

1. My MA income while Resident is equal to wages from 1/1 - 7/9 during my time in MA

2. My MA income while Nonresident is equal to my wages from 7/10 - 9/27 (equivalent 9/13) during my time in MD but prior to changes in MA tax rule for pandemic remote work.

3. My income after 9/27 (9/13) is NOT considered MA income despite my company being based in MA due to the state tax rule changing as of this date.

4. My non-Maryland income for my MD state filing is equal to the sum of 1&2 or entirety of my MA income through 9/27 (9/13).

5. My work in DC does not impact amount in (4) as I am getting my tax refunded via DC tax filing and should pay MD tax as a resident beginning on 9/27 (9/13).

Thank you again.

DMarkM1Answer

Level 15

1. My MA income while Resident is equal to wages from 1/1 - 7/9 during my time in MA YES

2. My MA income while Nonresident is equal to my wages from 7/10 - 9/27 (equivalent 9/13) during my time in MD but prior to changes in MA tax rule for pandemic remote work. YES

3. My income after 9/27 (9/13) is NOT considered MA income despite my company being based in MA due to the state tax rule changing as of this date. YES you are correct.

4. My non-Maryland income for my MD state filing is equal to the sum of 1&2 or entirety of my MA income through 9/27 (9/13). NO. Your non-MD income is only the amount in #1. Your MD income starts when you moved to MD 7/10. The amount in #2 is double taxed by MD and MA and you will claim a credit on your MD return for taxes paid to another state. Here are the steps:

1. Return to your MA return interview and select "Update" for the "General Info" section.

2. Verify your forms. You should be filing "Non-resident and Part-year tax return". If not, click "Change Residency" and select that category.

3. Continue to get back to the "Summary Page"

4. Select "Update" for the "Your Bottom line" category

5. Verify the "All wages" amount

6. Continue to page titled "Income Adjustments"

7. Only fill in the allocated amounts for the period you were non-resident (7/10-9/27) and put zeros in the other boxes

8. Continue through to the MA Bottom line page

9. Take note of the MA income taxable and MA Income tax amounts, you will use theses for the MD credit

10. Continue to get back to the MA summary page

11. Select "Update" for the "Your Bottom line" category

12. This time you will add the allocated amounts for the MA resident period (1/1 - 7/9); now both columns should have amounts

13. Complete the MA interview

14. Return to the MD interview

15. Edit the "Credits" category

16. Scroll down to "Taxes paid to another state"

17. "Start" and follow the prompts to get the credit for the tax on the income between 7/10 and 9/27

5. My work in DC does not impact amount in (4) as I am getting my tax refunded via DC tax filing and should pay MD tax as a resident beginning on 9/27 (9/13). Partially correct. See #4 above. Your MD residency began 7/10 and you will pay MD tax on all income from that date including the double tax time period that you will get a credit for. As you note however, there will not be double taxation by DC due to the reciprocity agreement between DC and MD that states you only pay tax in your resident state. Thus the DC taxes withheld will be refunded.

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