Filing Tax Return with Maryland - Remote Employee

[Questioner23]

I worked from Massachusetts, %100 remotely for an employer in Maryland. Since 2022, the employer started reporting MA in box 15 of W2 form (before, they used to report MD). Does a remote employee need to file tax return with MD? Has this question been definitely answered? Most answers I see online are subjective or merely an advice. According to the email I received from MyCOMConnect, I don't have to if I worked %100 remotely. Because the MD Comptroller website says that a nonresident must file Form 505 and Form 505NR if you have income from a profession or occupation carried on in Maryland; and then it says you don't have to file if you had no income from a Maryland source. The two statements don't seem mutually exclusive to me. So However, I requested some clarification from the same person from MyCOMConnect, he responded that he basically advised me based on the information received from his supervisors and that he doesn't legally represent comptroller legally. Does anyone one knows what exactly does MD Tax Law say about whether a MA employee who worked %100 remotely for an employer located in MD should file tax return with MD? 

For the years 2022, 2023, 2024, I filed tax returns with both MA and MD. Turbotax had me complete the nonresident state first (i.e. MD), yet for 2024, I had to pay tax to MD of the amount close to $1400 though my income from that state was not more than $30,000, I had an amount of $100 deducted on each paycheck, and I filed as head of household claiming one dependent. I got return from MA for almost the same amount.  Could something be wrong here? Note: I have been using Turbotax for many years, no chance that I had entered something wrong.

If I had not filed with MD (assuming that's what supposed to be done) then I wouldn't hear anything about owing any tax to MD, would my MA tax return have changed? I'm just curious to understand what Turbotax does behind the scene.

Thanks!

[mmaherTE]

You do not owe taxes in MD if you are working remotely from MA and have never done any of your work in MD.  Here is a link to an answered question very similar to yours:

https://ttlc.intuit.com/community/state-taxes/discussion/teleworking-for-a-different-state-from-the-...  

To get the taxes withheld for MD back you will have to file a nonresident MD return.  Here is a link to the MD Comptroller 2024 return information:  https://services.marylandcomptroller.gov/taxes/en/2024-individual-income-tax-forms?id=kb_article_vie...  

Scroll down to the first boxes in the nonresident info and it tells you if you are a nonresident and what to file.

[Questioner23]

Thank you for your response. The first link you provided tells how much the issue is confusing. Only the last answer on that page states that if a person is not physically in MD then the income is NOT considered from source in MD; therefore, that income should not be taxed.

You suggested to look at the two first boxes to find out what to file, but as I mentioned in my original question I have always filed MD nonresident tax return as TurboTax suggested and that in Box 15 of W2 the state listed after 2022 is MA, so why TurboTax says I owe money to MD?

If the answer "that an employee from MA who worked %100 remotely for an employer in MD" should NOT file tax with MD, then how my years back can I amend my taxes to request the money either pad back?

[NCperson]

@Questioner23 you can go back three years from the original filing deadline to claim the refund, meaning for the 2022 tax return, you have until April 15, 2026 to file an amendment in MD.  For 2023 tax year, you have until April 15, 2027, etc.  

[SteamTrain]

@Questioner23 

It's really hard to know what you did in those years, such that TTX might have indicated that you had to file nonresident MD taxes...whn..in fact, you didn't.

One way TTX "might" have prompted you to file MD taxes, is on the initial My Info page.....in there you "might" have indicated you  worked in another state.  If you entered "MD" in there as another state you worked in, then TTX would have told you to file MD nonresident.   But, in your situation, you should only have done that in the years that MD taxes were withheld.

______________

An additional comment...for the years that you amend MD to get the improperly paid MD taxes back, you will also likely need to amend MA too......since you probably claimed a MA credit for taxes paid to MD in each of those years.  What should end up happening is that you'll get some MD taxes back, but then have to pay those same $$ back to MA as a part of the amended MA tax return. 

I have no idea if MA will assess a penalty or interest on the taxes you should have been just paying them over the past couple years, due to the improper credit for taxes paid to MD.....   But just remember to start with the earliest year, and mail in each year's amendment separately. And it could get complicated enough, that you might end up needing to use a local tax professional instead.

[Questioner23]

@SteamTrain When uploading my W2 from from my remote work with the employer in MD, I was prompted to enter the information manually, I entered MA from Box 15, so TurboTax should know that the amount withheld was on MA behalf, but apparently TurboTax didn't catch that. Anyway, I'm definitely out of using TurboTax after a decade of using it.   

[Questioner23]

That's what I'm planning to do. I feel like the credit didn't get through or TurboTax got Mixed up, it seems to have used the filing history from 2021 to prompt me to file MD tax return.  In 2021 and before MD was withholding tax for MD (Box 15: MD), starting with 2022, MD withheld tax on MA behalf (Box 15: MA), in 2022 TurboTax probably did not update its rule and prompted to questions that were part of MD tax return filing as it did it 2021.

[NCperson]

@Questioner23 - wait a second... what do you mean MD withheld on MA behalf?????? if the state code on Box 15 on your W-2  says "MA", then THAT is where the money was withheld.  Your employer gave the money to MA and not to MD.  

Since you state you also filed in MA in 2022, 2023 and 2024, on the MA tax return and let's begin with 2022, what is on lines 30 and 38a? There should be nothing on Line 30.  

and it is HIGHLY unlikely TT screwed up (and if it did, this situation would have occured for 10s of thousands - maybe over a million people and these boards would have been flooded with complaints) , you would have been asked questions about your residence status as of 12/31 of each year as well as where you worked.  If you responded MD, that is why you are in this predicament.    

You may want to get a tax pro involved; sounds like you have "a mess" here that may be best for a tax pro to unravel. 

[Questioner23]

"You may want to get a tax pro involved; sounds like you have "a mess" here that may be best for a tax pro to unravel"

No thanks!

[SteamTrain]

@NCperson   I suspect that what he meant was that the MD "employer" withheld taxes for MA starting in 2022.   (though I guess his/her employer could actually have been the state of MD)

Employers that have at least regional operations will agree to do so, but not for many small employers that don't want to register to withhold state taxes for states outside their areas of operation.

_______________________

I do seem to recall that if a state formset is used for one year, the TTX software will prompt the user the next year to see if they need to file that state again.   The user can simply decline, but that kind-of assumes the user really understands the particular details of their non-resident state tax responsibilities.   With more folks working remotely, that has complicated that basic understanding for many users.....especially with some states and their telecommuter tax.....which creates it's own chaos.   Thus, this user should have declined the need to file in MD in the software for the year that MD taxes were no longer withheld, but probably didn't realize they could do so.

[NCperson]

@SteamTrain I understand where you are coming from....

When a taxpayer begins a new tax return and imports the data from last year, the VERY FIRST screen after the import, TT asks to verify name, SSN, birthdate, state of residency and whether you lived in another state this year.... if the OP indicated MA, and the fact that the W-2 had MA as the State designation in Box 15, I am at a loss how the software would have created a MD tax return.   

A few screens later TT asks if you lived in one state and worked in another; if the OP answered "yes" instead of "no" this could have created a MD tcax return.   It's a very clear question - the OP lived in one state and worked in that same state. 

Unfortunately, this is a user error and the risk of DIY software.