Accurately completing MD state tax form MW507

[alc2778]

Hello! 

I started a new job in July 2022 located in Maryland. I did not have a lease in Maryland until mid-September and was still at my house in Pennsylvania (where my family lives and where I’ve lived my entire life). I’m not sure how long I will have the lease for in Maryland, but it will definitely be past the 183 days to be considered a statutory resident. How do I accurately file taxes and fill out the MW507 form as a person domiciled in PA but a statutory resident of MD? Will I end up paying taxes in both states? Thank you in advance for your help! 

[Anonymous_]

@Mike9241 

[TomD8]

Q: "How do I accurately file taxes and fill out the MW507 form as a person domiciled in PA but a statutory resident of MD?"

A: Under these circumstances you would be liable for MD state income tax and thus would not file Form MW507 at all.  (Exception: if you live in a PA jurisdiction of York or Adams County, you would complete the MW 507 in order to exempt yourself from local MD income tax.)

Q: Will I end up paying taxes in both states? 

A:  Not in effect.  If you are both a statutory resident of MD and a domiciliary resident of PA, you will have to file a resident tax return in both states, reporting 100% of your income to each.  But you'll be able to claim a credit on your PA return for the tax paid to MD on the income that is taxed by both states, thus avoiding double taxation.

[alc2778]

Thank you @TomD8 for your helpful response. Since when I started my job, I did not have a lease in Maryland, I filled out Form MW507 and selected option 5:  “I claim exemption from Maryland state withholding because I am domiciled in the Commonwealth of Pennsylvania and I do not maintain a place of abode in Maryland as described in the instruction Form MW507.” Which was true when I began the job in July. I signed a lease in Maryland in mid September so how do I undo the exemption? Is there another form to fill out to say that Maryland taxes should be withheld? If there is a form to fill out, would it make more sense to wait until 2023 to begin withholding MD taxes since I technically haven’t met the 183 days of being a statutory resident? Or should I do this as soon as possible regardless?

They are currently not withholding MD state taxes from my paycheck. I do not want to get into any legal tax trouble since in mid March 2023, I will reach the 183 days associated with the definition of being a statutory resident of Maryland. 

[TomD8]

@alc2778 --

MD's 183-day rule is per tax year.

If in calendar 2023 you expect to be physically present and to maintain a place of abode in MD for 183 days or more, then you should have MD state income tax withheld.

[alc2778]

Thank you @TomD8 ! It’s been while but I have some follow-up questions to this scenario. This makes sense for 2023 since I will be a statutory resident of MD and domiciled in PA. I have my employer withholding MD taxes for 2023 and will file a resident return. They are not withholding PA taxes for 2023 - is this okay? When I file taxes next year for 2023, I will have to file a resident tax return for both MD and PA, but for PA, I can report my income and taxes paid in MD to receive a tax credit. Is this correct? 

For 2022, I did not meet the definition of a statutory resident for Maryland. However, I did have a lease in Maryland and was paying rent since mid September. Does this mean I was supposed to pay MD taxes as a non-resident for 2022? I only had my employer withholding PA taxes and filed for MD exemption since I said I was domiciled in PA. If they were also supposed to withhold MD taxes, how do I correct this mistake when filing 2022 taxes? 

[AmyC]

1. Yes, as a MD resident, you want MD taxes withheld. You should have filed REV-419 with your employer for the PA exemption. 

2. Yes. MD and PA are reciprocal states. See Reciprocal Agreement. Each state allows an exception for the other.

3. No, the reciprocal agreement covers you. Form 505 for Maryland Nonresident Income Tax Return

Form for nonresidents to file if:
 

• they are required to file a federal return based on the minimum filing requirements, and
• they received income from sources in Maryland

Note: This form is not required for nonresidents who reside in the District of Columbia, Pennsylvania, Virginia or West Virginia and had only wages from Maryland.

4. No mistake, no problems. Just file your PA resident return for 2022.

[alc2778]

Thank you @AmyC. Do I still file REV-419 as someone domiciled in PA (PA driver’s license) but a statutory resident of MD? 

[AmyC]

Slight change. Since you are maintaining your PA residency, I am assuming you intend to return to PA. In that case, I would  continue with the PA withholding. MD will give you a credit when you file MD504CR wtih your return showing the PA tax paid.

See MD Resident instructions page 20.

[alc2778]

Thanks @AmyC! Is that still correct even though I will meet the definition of a statutory resident in MD? I do intend to return to PA after my job ends July 2024.

[AmyC]

Yes, you are maintaining your PA residency so you will be filing the PA return with the PA withholding. You are only filing MD as a resident due to their 183 day rule. Otherwise, you would be a non-resident in most of the rest of the country. That is why I included the MD resident information in my last answer. 

You have no worries since they are reciprocal states. Many states are not reciprocal and then you have more issues.