My job is in NY, but I worked remotely in Maryland last year. Do I need to file MD state tax?

[cliffycheng]

Hi all,

I work for a New York based company. I believe I'm considered domiciled in NY (I own a permanent residence), but during COVID all of last year, due to a family health issue I was living with my parents in Maryland. I have a few questions, if anyone would mind helping?

- Am I correct in thinking that I am considered a full time resident in New York, and need to file taxes as a nonresident in Maryland?
- TurboTax is asking me to "Enter the portion of this amount (federal return) that represents wages from Maryland sources". Since I was technically in Maryland all year, am I correct in thinking that my ENTIRE federal return would be considered Maryland sources? Or is Maryland sources considered income from a Maryland-based company?

Thanks in advance!
Cliff

[ErnieS0 · Accepted solution]

Yes. If you own a permanent residence in New York, I’d say you are a full-time resident of New York and a non-resident of Maryland.

All your wages are Maryland sourced because you earned them while physically working in MD. 

Generally, Maryland imposes income tax, and therefore a withholding requirement on employers, for employees living in Maryland and non-residents receiving Maryland-sourced income. Income is deemed Maryland-sourced income when the income is compensation for services performed in Maryland. 

See Example 5:  EMPLOYER WITHHOLDING REQUIREMENTS FOR TELEWORKING EMPLOYEES DURING THE COVID-19 EMERGENCY

Edit 04/09/22 | 15:21 PT You can claim a credit on your NY return for tax paid to MD.

[cliffycheng]

Thanks so much for your help!

[cliffycheng]

Sorry, if you wouldn't mind a few follow up questions, I'd greatly appreciate it?

- Does what you said above apply for dividend/capital gains income as well?
- Hypothetically, if I spent half of my time in MD and half of my time in NYC, how would I determine how much of my wages were Maryland source? Is it just dividing the taxable income by whatever percentage of time I spent in Maryland?

Thanks so much!

[DanielV01]

Here's the answer to your two questions:

What about capital gains and dividends?  These are not normally items taxed in a nonresident state.  Capital gains and dividends are only taxable in a nonresident state if they are directly derived from that state (such as off of a property sale for property held in that state).  But gains on stocks, bonds, and other "intangibles" are only taxable in your resident state.

How about if I spent only part of the year in Maryland?  Prorate the income.  It may take some math, but you will only report to Maryland income you earned while working in Maryland.  There are several different methods you might choose to determine the correct amount.  One method is to divide the number of days you actually worked in Maryland by total working days, and another method is if you have an exact amount reported to Maryland, then use that figure.  Maryland's return doesn't have the same allocation screens that the New York nonresident return has.  

But as stated above, any tax you end up paying to Maryland will be considered for a New York credit for tax paid to another state.  New York may well give you full credit for the tax you must pay to Maryland.

[cliffycheng]

Understood, thanks for the detailed explanation!