Yes, you need to file a Pennsylvania tax return and a Maryland tax return. Both returns will be part-year resident returns.
Because of HR's error, your withholding money is currently sitting in the wrong state's bank account. Because no PA taxes were withheld from your paychecks for the 7 months you lived there, you are going to owe a tax bill to Pennsylvania when you file. But, because your employer mistakenly withheld MD taxes for the entire 12-month year, you overpaid Maryland and will get a refund from Maryland.
- Enter the W-2 exactly as it is. Put Maryland in Box 15, the full year's wages in Box 16, and the full year's withholding in Box 17.
- In the "Personal Info" or "My Info" section, it will ask where you lived in 2025. You will indicate that you lived in more than one state, setting Maryland as your former state and Pennsylvania as your current state. Enter the exact date you moved.
- When you start your Maryland state return, the software will recognize you are a part-year resident and take you to an "Income Allocation" screen. It will ask how much of your total W-2 income was actually earned while living in MD. You will calculate and enter only the 5 months' worth of wages. Maryland will calculate the tax on just those 5 months, see that you paid 12 months' worth of withholding, and issue your refund.
- When you open your Pennsylvania part-year resident return, you will do the exact same thing. Tell the software that the remaining 7 months' worth of wages belongs to PA. Pennsylvania will calculate the tax due on those 7 months.
- The part-year resident allocation screens are where you are reassign the income to the correct states based on your calendar move date.
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