Tax Year Prior to 2020: Work in Maryland but live in DC

[Jesse8488]

I moved to DC in July from Oklahoma but commute to work in Maryland. I noticed that my employer was taking out Maryland taxes and not DC taxes but they said they can not take out DC taxes because they have no locations in the DC area. So as far as filing my taxes how would i go about that? Do i file for both DC and MD? And for future how can i change it so that i don’t have to pay any MD taxes?

[JulieC14]

Typically, you will owe income taxes to the state in which you are physically working.  But Maryland and DC have a reciprocity agreement which allows the residents of one state (such as DC) to request an exemption from tax withholding in the other (reciprocal) state (MD). This can save you the trouble of having to file multiple state returns in the future.   

For this year (2019), because Maryland taxes have been withheld, you will need to file a tax return in both Maryland and DC.  For Maryland, you will need to file a Non-Resident return to get a refund of your taxes withheld back and then file a Resident (or Part-Year Resident for 2019) return for DC.  Note that you will owe taxes for DC if none have been withheld for the time you have been a resident. 

See more information about filing a Non-Resident tax return in TurboTax here:  How do I file a nonresident state return?   Note:  For 2019, You will also have to file a Part-Year Resident return for Oklahoma and DC for the time you lived in each state.  How do I file a part-year state return?

To prevent Maryland taxes from being withheld in the future, complete a Maryland withholding Exemption Certificate and give it to your employer.  Here is a link to the form:  MW507  Per the state's website instructions, you will want to follow the instructions for line 4 of the MW507 form.  See the sample screenshot of the MW507 form below.

Important:  If you asked your employer to withhold taxes for your resident state instead of your working state and they can't or won't do it, you'll have to make quarterly estimated payments to your resident state (DC) or risk underpayment penalties come tax time.  TurboTax can help you calculate your estimated tax payments for 2020.  See more information here:  Can TurboTax calculate the estimated payments for next year's state taxes?