I moved states (from MD to NY) this year to start a new job. When I entered my NY W2, my MD return changed. Why would a W2 in NY affect my return in MD?

[amy61]

The change was pretty dramatic - I went from receiving a refund in MD to owing over $1000 in MD. I checked that my W2 for my MD job is listed in MD, and my NY W2 is listed for NY. This feels like a glitch but can't figure out how to correct it.

[JeffreyR77]

You should review both your W2 forms and then review your Maryland state return entries in TurboTax. 

Your resident status likely changed when you started your New York return.  You are probably a part-year resident of Maryland now and you may have been a full-year resident before you added the  New York income. 

Once you complete the Maryland return, complete your New York return.  You are also probably a part-year resident of New York as well. 

Each state taxes you on the percentage your income earned in there state is of your total gross income, not just the exact amount of dollars earned in that state.  

Filing Multiple State Tax Returns in TurboTax

[amy61]

I don't understand. If that's the case, it seems like I would be paying double taxes (taxes in MD and taxes in NY) on an income I only earned in NY. Are you saying that because I moved, ALL my income this year is taxed in full in both states? That seems like a major penalization for moving to a new state. I moved from VA to MD (but stayed at the same job) a couple years ago and did not have this issue. I received a W2 for both states, and they accounted for my income while I was living in each state. 

Maybe I am misunderstanding - can you clarify?

For reference - I input my move date and current residency into Turbotax before I even started the W2s. I thought once I moved I became a NY resident. I have completed both W2s and quadruple checked them. 

[JeffreyR77]

You are not paying double taxes.  You are paying at the tax rate that your income would be if your income were all taxed by the one state. 

For example:  For a couple that earned $90,000 in  Maryland and $50,000 in New York, New York will begin with their total income of $140,000, less allowable deductions in this case coming to $120,000 in taxable income. 

The tax on $120,000 for their filing status is then multiplied by the percentage their New York income was of their total income, in this case $50,000/$140,000 or 35% to come up with their NY tax liability.  

Maryland will do something similar, only  using the Maryland  income as the base number to come up with the tax percentage.  

This relationship is why it is important to navigate through TurboTax state returns in the order of part-year states first and completing your end of  year resident state return is completed last to ensure the lowest tax liability is computed.

While many states apply this methodology, Maryland and Virginia have reciprocal agreements than make moving between the states easier. 

[amy61]

Ok, I think what you mean is: depending on my income in NY, the total earnings could place me in a different tax bracket in Maryland. So if I my total earnings placed me in a higher tax bracket, I might owe Maryland additional taxes. Is that correct? 

If so, there is definitely something wrong, because I earned less money in NY than I would have if I stayed at my job in Maryland (though the difference is small enough I would think I would stay in the same tax bracket anyway).

So you know - I earned about $13k in Maryland, which was about 30% of my income. It's saying I owe over $2000 to Maryland, which seems way too high for what we're discussing. Right? If this sounds wrong to you let me know and I'll call a rep tomorrow to try and figure out what's going on.

[ThomasM125]

You should look for a credit for taxes paid to another state on your Maryland return. You should have an opportunity to enter your New York taxes on your Maryland return and have them deducted from your Maryland tax.

[MDTOWV]

I am curious to know if this issue resolved itself?

I am currently have the same issue with my two state returns. One state is saying that I owe over $4,000 while the other one says $100 which this one is expected. I have never owed in the past and depending which state I enter first into turbotax the amounts flip between states. I had a turbotax tax expect attempt to help, but they couldn't figure it out besides saying I don't owe $4,000. I also called into their hotline and they told me to wait till the system updated all the state tax information, which I did and I still have the same issue. 

Did you have any success? 

[JeffreyR77]

All W2 information needs to be entered before starting any state return. 

You need to enter the part-year resident state first and the state you resided in on December 31st last for the calculations to be correct.  

New York State taxes on total income and allows a credit for taxes paid to another state on income that is taxed by New York and another jurisdiction. 

That is why 'flipping back and forth' creates inaccurate results.