Moved to MD from PA in May. How do I correctly reconcile the PA, MD, and City of Philadelphia taxes?

[leeleses]

Hello All,

In theory, my return isn't too difficult!

But I need help because I went to another job in a new state (Maryland) in May.

Until May I worked in PHILADELPHIA as a 911 dispatcher.
After May I now work as a police officer in Maryland!

I have to enter the following:
1) W2 from City of Philadelphia
2) W2 from City of Baltimore
3) 1099-R from Philadelphia - pension

* I did not work in either state at the same time.
* I read that in Maryland the state also collects the local taxes.

So,

1) I thought I read somewhere when you move to another state that it matters which state return you do first in TurboTax?

2) Why does it ask if you were a public safety officer, and does anyone know if a 911 dispatcher in Philadelphia is a public safety officer? Could they be asking this to determine if you should have paid in to social security or not?

3) Does anyone know how to correctly reconcile the state taxes in this situation between PA, MD, and PHILADELPHIA? Will entering the two W2's accomplish this, or do I have TT questions to answer correctly too?

4) LOTS OF CONFUSION HERE -- The 1099-R is as follows: box 1, 7900, box 2 7900, box 4 1580, box 5 is zero, box 7 is code 1, box 9b is zero, everything else is blank or not checked.

It's asking me what state I was in when I got the 1099-R?

I don't think I did anything with this pension money from Philadelphia? Who has the 1580 that was withheld in box 4?

Why does it say code 1 in box 7, it's asking me where the distribution is now and did I roll this over and replace the 1580 withheld or not?

Do I need to rollover this 7900, since I don't work anymore in Philadelphia?

Thank you for any and all help!

[ErnieS0 · Accepted solution]

File part-year year income tax returns for Pennsylvania and Maryland. 

Maryland does collect Baltimore city tax. It’s included as part of your Maryland return. TurboTax will ask what city you lived and worked in. Your City of Baltimore W-2 should have local wages and tax in Boxes 18-20.

In answer to your questions:

1. Since you don’t have any overlapping income, the order you prepare returns does not matter. Most people find it easier to prepare the returns in order — PA first, then MD, but you can do either.
    
2. TurboTax asks whether you were a public safety officer because some states give tax breaks for certain types of pensions. Pennsylvania does not. It is not related to Social Security. IRS defines “retired public safety officer” as a "law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew."
    
3. As a part-year resident of two states, income earned while living and working in PA is Pennsylvania income. Income living and working in MD is Maryland income. Both state sections will ask you to split your income. Maryland will ask you to subtract your non-Maryland income (income earned in PA). PA will ask you to list your PA income.
    
4. Your 1099-R Box 2a is the amount you’ll be taxed on. You will pay tax to the state you were living in unless you moved this money into another retirement plan. Generally, you have 60 days to roll over your money, so it’s probably too late. If you did roll over $7,900 you would have had to add $1,580 because that was sent to IRS and can’t be rolled over. You could roll over $7,900 - $1,580 and pay tax on $1,580.

[leeleses]

Thank you Ernie,

I prepared 2 part-time state returns.

On the federal return it shows the 7900 as income and I owe the fed 439.

BUT, and I looked at the forms views, why does it seem I don't owe PA extra for the 7900, but in Maryland I seem to owe 396?  I can see the 7900 added as income on the Maryland return?

Is it because PA does not tax this type of 1099-R, but MD does tax it?

UGH!

[leeleses]

ALSO, this part all looks good -- "Maryland does collect Baltimore city tax. It’s included as part of your Maryland return."

MD did withhold state taxes, and local taxes for Baltimore county...

[leeleses]

I also see the penalty of 790 on the form 1040, that's not helping either!

[JohnB5677 · Accepted solution]

Please clarify you situation.

• You were talking about your state tax returns. Did you switch to your Federal?
• Are you seeing a penalty on line 38 of your 1040 tax return?
• How much tax did you owe on line 37?

The underpayment penalty may apply if :

• The amount of tax you paid during the tax year is less than 90% of the tax that you owed for the current year. 
• The amount you paid during the tax year did not equal 100%, (110% for higher incomes) of your taxes owed the prior year. 
• The IRS also says you can probably avoid the penalty if the amount you owe is less than $1,000, after subtracting withholding and refundable credits.

To avoid this situation it is recommended that you adjust your W-4 with your employer, or pay estimated taxes.