Live in Maryland and work in Virginia

[MR32019]

Hello! I am almost done completing my taxes. My Virginia job withheld taxes from my pay for Virginia even though I live in Maryland. Because of this I am filing with Virginia, too (using the desktop download TurboTax). One of the last sections of the Virginia taxes says “enter your expected refund amount”. Is that supposed to be the amount that Virginia withheld that is listed on the W2? I know that Maryland and Virginia have a reciprocal agreement. There were no help or instruction links with this question. Thanks!

[SteamTrain]

Here's waht I would recommend

Delete the VA tax return entirely (But not the W-2 itself)!  All that income is only to be taxed by MD, and thus you may owe them quite a bit.

You only need the VA form ....763-S.

This form 763-S has to be mailed in, with the state copy of your  W-2 showing the erroneous VA withholding 

(I hope you fixed that with your VA employer to have that stopped entirely....the employer "might" even be able to withhold MD taxes instead.)

You can get a fillable PDF copy of the 2023 form 763-S on the VA Dept of Revenue website here:

Forms | Virginia Tax

[MR32019]

My job withheld for both states and I was able to get them to stop withholding in Virginia. The TurboTax instructions were to file with my resident state AND the state with a reciprocal agreement if that state with the reciprocal agreement withheld taxes. As I was going to finish filing it does say that I will need to mail in the Virginia return, but I don’t know if it is the form you mentioned?

[SteamTrain]

Sorry, that I don't know.  Gues you could fill it out and see what happens...but with the Online software, you'll have to pay for each state's software set, even if it ends up being only one VA form. I was hoping you could avoid the extra state charge by using just the MD tax forms.

________

We can try to prompt @DJS  To see if he knows whether the VA software will create JUST the form 763-S in your situation.   He used to work specifically with the VA software, but I haven't noticed him in this forum recently.

[SteamTrain · Accepted solution]

And yes, the refund amount you expect to get from VA is just the VA withholding on that W-2.

AND #2: if you see a section in the MD Q&A section about taking a credit for taxes paid to another state (i.e. VA)  ...that's a Nope...MD expects you to get the VA withholding $$ refunded to you...no credit for that.

[MR32019]

Thank you so much for your help!

[DJS]

The Virginia program does include form 763-S, Special Nonresident Claim for Individual Income Tax Withheld. 

Form 763-S
• Used by nonresidents to claim a refund of Virginia tax withheld if not required to file

You can download the form here: https://www.tax.virginia.gov/sites/default/files/taxforms/individual-income-tax/2023/763-s-2023.pdf

[Suchin21]

Do you know if there is a form on the Maryland side that we can file if my work took out Maryland taxes even though I live in Virginia? Must I pay thousands Virginia says I owe, plus an underpayment penalty (because it looks like I became a self-employed person after I left my previous job in January where I had paid Virginia taxes)? And then also file a non-resident Maryland tax return to get a refund of all the state taxes I paid to Maryland? Is there any easier and cheaper way to go about this? If not, does it matter what order I do the state returns in TT? I already did the Virginia one but stopped in the middle once I realized why it said I owed so much.

[AmyC]

You will want to file a form with your employer for the withholding to be correct. See Which states have reciprocal agreements? for the correct form and instructions.

As for 2023, you will need to file both state taxes. Since you are being hit with penalties in VA, let's go another route. You will file the MD nonresident return with your MD income and then take a credit against VA for taxes already paid to another state. This should eliminate the penalty.

You will need to complete the MD return first for the tax liability to carry over to VA to be used as a credit.

You get credit for the lower state tax on the lowest taxable amount.

• Each state calculates taxable income differently. 
• Each state has its own tax rate/ system.
• You get the lowest of both categories as a tax credit.

[Suchin21]

Thank you so much. I just spoke with a VA tax dept rep who essentially said what you did and added that I need to send a copy of the VA tax return to MD and MD return to VA when filing with both of them. He said I should enter the amount of taxes paid to MD on the VA return in the "over payment credit" field which should take off the overpayment penalty and sending the MD return will be enough proof for them. He didn't say I needed to attach a separate note, but told me to check with MD to see what they require. I have not been able to get MD rep on the phone.

Some questions specific to TT functionality:

- Since I already started the VA return in TT, am I able to hold off on completing that return then pay for another state return for MD and complete the non-resident MD return in TT first then go back to the VA return?  

- Do I need to delete the VA return before adding another state return in TT for MD? If I do that, will I have to pay for VA state again even though that was the one state return that was included without extra fees  (I am on TT Deluxe Desktop version)?

- If I am to complete the VA after MD, will the information already entered on the federal and MD returns auto-populate correctly into the VA return, including the overpayment credit amount, or will I need to manually enter that into the TT VA return (and is that easy to find)?

- Finally, do you know if TT allows another state's return to be attached (along with the federal return) when e-filing, or will I need to physically mail them both in?

Thank you again.

[AmyC]

1. Yes, complete MD first

2. If you are using desktop, you won't be able to delete. If you are online, deleting it would be good.

3. I know we attach returns when required but I am not 100% sure of your situation since we are coloring outside the lines by claiming MD income. I would recommend you efile both returns. If a state did not receive the other state, they will ask and you can send it in or upload it. That would be better than mailing them in to start the process. Mailing means they can lose random papers which could end up being worse.

Be sure to keep records from your phone conversation and here to help in the future!

@Suchin21 

[Suchin21]

Both reps said it's better mail in the returns to start off with everything all together rather than wait for them to ask for additional information. I will see if I can attached the additonal other state return when efiling and if not, I will decide then.

I do have desktop unfortunately. I can go in and zero out all the information I added in the Virginia return before adding Maryland into the mix. Will that help or make things worse?

Do you know where I would enter the overpayment credit on the VA return? I don't see it anywhere in TT nor can I find any information in the community forum.

[MarilynG1]

In the Virginia interview, you will have the opportunity to enter the Maryland income and tax paid for credit.

@Suchin21 

[Edited 3/26/2024 | 6:20 pm]

[SteamTrain]

(3/27/2024: edited out)