I am a PA resident (Philadelphia/Phila County) and primarily work in Philly as well, but I hold a part time gig in Maryland. Since Maryland and PA have a reciprocal agreement, I have an MW507 on file with my Maryland employer that correctly files me exempt from Maryland state tax (number 5, PA resident with no place of abode in Maryland). As far as I'm aware, I am still subject to county/locality tax in Maryland since I am not a resident of York or Adams County. The W2 I received from my Maryland employer is formatted differently than others, but that's not directly the problem I'm facing. For box 15, for state, shows two entries, one for PA, and one for Maryland. My wages are reported in box 16, once for Maryland, and the same amount again for PA. At first glance, this seemed fine.
However, the W2 lists a value in box 17 for MD state tax, despite my MW507 status being state tax exempt. Box 19 for Locality tax, is blank. From my most recent paystub I can verify that Maryland state tax is not being withheld from my pay, and I can verify that locality tax is correctly being withheld. I noticed that the value for local county tax YTD on my last check is the same value listed in box 17 for state tax on my W2. At first I believed this was an error, and that local tax was incorrectly entered into the state tax box on my W2. But when I contacted my employer's HR department about this discrepancy, I was told that the W2 is correct that the amounts are placed in the required boxes per specifications from the federal government, and the Maryland Comptroller. Why the federal government has any say in state and local tax, is beyond me, but that's what I was told. I'm not sold that this is correct based on the very basic explanation I was given. HR has repeatedly refused to call me after I have left several voicemails and emails requesting a callback. It seems I am stuck with only emailing them for basic answers - in their last email they simply said to contact my tax professional with help regarding this. Not super helpful.
This may make sense for MD residents, but for a PA resident who is exempt from state tax, this is very confusing - especially when there is a specific box for state and local tax; why wouldn't both boxes be appropriately used? I digress, the problem is, when I add my W2 from my Maryland employer into TurboTax, TurboTax reports that I am owed a refund in the amount listed in box 17 from the state of Maryland - which is I don't believe is correct, since that amount is actually the county locality tax - that I have paid through withholding, and that I believe I am subject to. Furthermore, this also prompts TurboTax to report that I owe PA state tax in the amount as it shows in box 17 for PA. However, I have already paid this amount, as PA tax was correctly withheld from my paycheck - which I can also verify from my last pay stub. I think this is due to box 16 reporting my wages twice, for each Maryland and PA - but this one I can't figure out. I know for sure I should not be receiving a refund from Maryland, and I believe this is due to the local tax being entered into the state tax box.
My questions are - is my Maryland employer correct in how they list my wages twice in box 16, one from Maryland and again the same amount in PA? And is it correct that Maryland county tax is listed in the Maryland state tax box 17?
If I enter my W2 information as it's written on my W2, TurboTax tells me I owe PA money that I have already paid, and that Maryland owes me a refund of money that I actually owe the county in which I work. Can anyone familiar with working in Maryland, but living in PA, shed some light on this confusing situation?
