Maryland State Tax Return - TurboTax Calculating That I Owe?

[kegglest]

Hello! I am hoping that this is a common problem someone can help me untangle. I moved from Virginia to Maryland in April 2020, and am a permanent Maryland resident for 2020 filing purposes (lived in the state more than 6 months, state is my permanent home). I have double and triple checked that my W-2 info is correct, but for some reason TurboTax is calculating that I owe a large amount, even though I've paid MD income taxes since I moved here. What is going on? 

[SteamTrain]

Hard to know....have you run thru the MD part-year tax return income allocations yet....if not, then you have to do that before the tax amount will be (nearly) correct.

First thing to note, is that your Federal section must be completely filled out with every scrap of income, Deductions & Credits before you venture into either of the VA Part-year or MD part-year interviews.  You change anything in the Federal sections and it screws up the state sections.

Once the Federal is fully prepared (but not filed) you have to run each of the state's part year interviews to indicate what sub-part of the Federal income was received while a resident of each state.  As an example: you had say, $100 of interest income during the year.....in the interview, you'll have to show each state how much was received by your accounts when you lived in that state....same goes for Dividends and Capital Gains.  Mutual fund distributions are a particular problem since major portions are usually issued in Nov/Dec....so that Nov/Dec income would all be tagged as MD income.   SO...monthly records of all your accounts are critical to dividing it all up.

Up until you actually do those state interviews...the state sections will consider (almost) ALL the Federal income as belonging to that state.    You did indicate your move in the My Info section didn't you?....that has to be done to trigger the part-year tax returns for each state.

Certainly the reciprocal tax agreement between MD and VA could complicate the prep....but it should still be doable.

And you may have to run thru everything a few times before you get it right...don't rush, and don't touch either of the state parts until EveryThing is filled in properly and completely in the Federal taxes section, with nothing left to deal with.

[kegglest]

Hello! Thank you for taking the time to write that all out! My tax returns are quite straight forward, just employment income and nothing else, so I'm confident I entered everything correctly. The Virginia return came back fine, it's just the Maryland that's the trouble. I suppose I'll call a rep and see if we can sort it out. I find it strange that when I finish the VA tax it shows how it calculated but it doesn't do the same steps for the MD, which is why I'm not sure what the problem is. If we get is resolved I'll be sure to update here with what the problem was!

[SteamTrain]

Yeah...we, as other users, can't see what your forms look like (and shouldn't).   So it could be some kind of MD  bug.  Just make sure that if you had any MD tax withholding on the W-2, that it is reflected in the MD section as a pre-payment.

I don't really know how the part-year interview proceeds for the MD interview...but in my NC part-year interview, there is a page that asks for me to indicate what part of each W-2 income was NC income....or whether multiple W-2 state entries...which ones were to be considered NC income and which were not .   If the MD software does something similar you might have failed to indicate some of the W-2 income as not being MD income (meaning anything earned while living in VA)....or there may be some quirk in the software that MD does differently.

Really need someone else with MD tax software and experience to see how the MD software deals with the $$ that need to be removed from MD income.

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Ohhhh   @dmertz 

You do MD don't you ? 

DO you have any input on how the MD part-year interview proceeds such that this user can make sure they have taken out their pre-MD residency income?

[dmertz]

I doubt that this has anything to do specifically with a Maryland tax return.  You should be filing part-year returns for both Virginia and Maryland.  On each you will identify what portion of your income was earned while a resident of each state.  Assuming that your W-2s include both income earned while a Virginia resident and income earned while a Maryland resident, you should see on the W-2 state tax withholding for both Virginia and Maryland.  You should see each state's tax withholding credited on the corresponding state tax return.  I haven't specifically looked a preparing a Maryland part-year tax return, so I can't provide much more in the way of details.

Note that Maryland and Virginia have reciprocal tax agreements, so whether your employer was in Maryland or in Virginia, your employer should have been withholding state taxes for the state in which you were a resident at the time that you earned the income.  If the employer was not timely notified of your change of state of residence or simply failed to withhold taxes for the correct state, you'll get a refund of any excess taxes paid to one state that you'll then use to help cover any underpaid tax liability incurred in the other state. 

[kegglest]

@dmertz @SteamTrain Thank you both so much, based on your replies I was able to sort it out! There is a difference in the MD 502 forms for a part time vs full time resident; the full time resident form is technically more correct for me (6+months in state), but it doesn't allow you to enter your non-MD income as a separate amount. I dug through and found the page where it was calculating the full year's income as MD only and switching to the part time 502 form and adjusting to subtract the VA income fixed the problem. Whew! Thank you again, that's a huge stress relief to have resolved!

[dmertz]

The 6-months requirement just determines whether you are a resident (filing Form 502) or a non-resident (filing Form 505).  It has nothing to do with determining whether you are a full-year or part-year resident.  The fact that you were a resident of Maryland for less than the full year means that you were a part-year resident.  You were not a full-year resident.

[gkhuat]

Hi @kegglest may I ask how did you dig through and found the page where it was calculating the full year's income as MD only ? I had the exact same issue now in which Turbo tax also said I owe Maryland income tax (which is double what I already paid) and I checked the amount I paid to Maryland. It seems correct percentage so I doubt I owe that much Maryland state income tax. I could not find where the form 502 is in Turbo Tax to correct. 

[RaifH]

If you are using TurboTax Online, you can see your Maryland taxable income using the tax tools menu on the left-hand side of your screen:

1. Open or continue your return.
2. Select Tax Tools in the left menu (if you don't see this, select the menu icon in the upper-left corner).
3. With the Tax Tools menu open, you can then view your 1040 form: Select Tools. Next, select View Tax Summary in the pop-up, then MD Tax Summary in the left menu
4. This screen should have the federal adjusted gross income as well as the Maryland adjusted gross income.

If something does not look right, then your income is probably not being properly apportioned between your two states.

@gkhuat