Work and live in two different states

[Rfo]

My husband and I have both remote in Minnesota and live in Minnesota. Both of our employers are in Maryland. 

My employer does not take out Minnesota state taxes, and stopped taking out Maryland state taxes in April of last year

My husband’s employer takes out both a Minnesota in Maryland, but also stopped taking out Maryland in April of last year

I thought we had to file under Maryland as well as a Minnesota because our jobs are located there. But now that they both have stopped taking out Maryland taxes has something changed? Please let me know what remote workers from a different state are to do? It also means that we haven’t been paying taxes since April for Maryland, and all year for me for Minnesota.

[Vanessa A]

Maryland does not tax non-resident remote workers.  They only tax you for work you perform inside the state.  

So you should file a MD non-resident return claiming $0 income on that return UNLESS you physically worked in the state of MD then you would need to prorate based on the number of days you were physically present in the state. Nothing has changed in recent years that would have the way your MD remote income would be taxed. 

All of your income is taxable to MN.  If your employer is not withholding for MD, then you need to make quarterly payments to your resident state so you do not end up with an underpayment penalty.   ALL income from ALL sources is taxable to your home state. 

[Rfo]

Thank you ! so is there something I should do for the past incorrect years? MN gave me credit for taxes paid to Maryland. It’s strange that April of last year both of our separate employers stopped taking Maryland out altogether. 

[AmyC]

COVID changed the way we work and the rules. States have been changing rules regularly in response to our changing workforce. Because each state has been changing, as long as both states are happy and you haven't gotten any letters, I would not change things. In 2020, the North Eastern States Tax Officials Association (NESTOA) was created to work on the issue. MD is part of NESTOA but not MN. This creates more layers of rules for how things are handled in MD.

Here are the rules from MD Nonresident instructions for 2024:

A nonresident individual is subject to tax on that portion of the federal adjusted gross income that is derived from tangible property, real or personal, permanently located in Maryland (whether received directly or from a fiduciary) and on income from a business, trade, profession or occupation carried on in Maryland and on all gambling winnings derived from Maryland sources. Adjustments to federal gross income and losses not allocable to Maryland may not be used to reduce Maryland income. You are required to file even if the net Maryland income is a loss.

References:

COVID-19 Withholding Requirements for teleworking ...

Personal Tax Tip #56 When you Live in One State and ...