Teleworking for a different state from the one in which I reside

[Paganini600]

If I work for a federal agency that is located in Maryland, but I was hired to telework from Tennessee (where I reside full time) and I go to MD two days every month for meetings (zero days now because of COVID), does MD have a right to deduct state taxes from my monthly pay, and, should I submit a state return for MD?

Thanks.

[TomD8]

MD has the right to tax the portion of your income earned on the days you physically worked in MD.

MD does not tax non-resident remote income.  The income you earned working remotely from TN is not taxed by MD.

You must file a non-resident MD tax return if you were required to file a federal return and you had MD-source income, or if you had MD taxes withheld from your pay.

[KathrynG3]

It depends on whether you were compensated for personal services performed in any Maryland county or Baltimore City and you lived in a jurisdiction that imposed a local or earnings tax on Maryland residents. They can potentially charge you tax for the days you visited Maryland before you began working remotely. 

See Page 4, Maryland 2020 Nonresident Tax Forms & Instructions

[Paganini600]

Thanks for the quick reply. The building is located in Montgomery county. I have never set foot there actually, because I was hired during the COVID pandemic. So far, 100% of my work is done in the state where I reside. The state where I reside has no state income taxes but has a higher sales taxes.

[TomD8]

If you never lived in or physically worked in MD in 2020, then your income is not subject to MD taxation.

Unfortunately, if your employer mistakenly withheld MD taxes, you'll have to file a non-resident MD return, showing zero MD income, in order to get those taxes refunded.

[Marka81]

@TomD8 could you give your input on a similar situation I am dealing with?

One expert said that it is MD sourced income, while another expert said it is not.

Here is my post

https://ttlc.intuit.com/community/state-taxes/discussion/lived-in-ma-md-and-ma-taxes-withheld/00/297...

[ErnieS0]

Maryland does not tax teleworkers unless there are days when they are working in-state.

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 EMPLOYER WITHHOLDING REQUIREMENTS FOR TELEWORKING EMPLOYEES DURING THE COVID-19 EMERGENCY

[Marka81]

That is my understanding as well. My employer - I work for the Department of Defense ( my duty station is in MD), but I live in MA. Never psychically worked in MD. My employer- The Department of Defense has been withholding MD and MA taxes however. So that is why I am questioning if this is MD sourced income. 

Thank you for the link. I am attempting to reconcile two sections in that announcement.

"Maryland employer withholding requirements are not affected by the current shift from working on the employer’s premises to teleworking because taxability is determined by the employee’s physical presence. ... Income is deemed Maryland-sourced income when the income is compensation for services performed in Maryland. "

Ok, great, so taxability is determined by physical presence of the employee. But then it says as an example:

"...Unlike the aforementioned states, Delaware has not entered into a reciprocal agreement with the state of Maryland. Compensation paid to a Maryland nonresident who is teleworking in Maryland is Maryland-sourced income, and therefore, subject to withholding."

Maryland nonresident = Delaware resident, "teleworking in Maryland" This is ambiguous. How do you "telework" *in* Maryland if you are a nonresident working from Delaware? Why call this example out at all? If the point is to say any nonresident that is working remotely and physically not in Maryland is not Maryland-sourced income, then this example is not very good.

This is very confusing!

@ErnieS0 

[TomD8]

@Marka81 

"Compensation paid to a Maryland nonresident who is teleworking in Maryland is Maryland-sourced income, and therefore, subject to withholding."

The wording is a bit ambiguous, but the meaning is that if you're a non-resident of MD who happens to be "teleworking" from a physical location inside Maryland, then your income from that work is Maryland-sourced regardless of your employer's location, and it is taxable by Maryland.

[Marka81]

Thank you! That makes sense so all about your physical location. Not physically present, not MD sourced income. That is it right?

[TomD8]

Correct.  The work income of a non-resident of MD who never works from a physical location inside MD is not MD-source income.

[Marka81]

Thank you, sir!