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I'm just starting the initial phase of my taxes, kind of to get the shock over with while I still have time to come up with the money. My question is in regards to my wife's income.
We live in MD and she works just over the line in DE so they take out both MD and DE taxes from her check. I have been assuming that she would get a refund from DE but it doesn't seem to come out that way. She owes several hundred more to the state of DE in addition to the hundreds already withdrawn from her check and she doesn't even live there. That is on both the turbo tax and H&R Block sites. I remember being payed from a NY company before having NY taxes taken out of my check and getting every dime back since I lived in MD, and H&R block did the taxes. Does it sound normal to pay state taxes in 2 states? Hell, I thought DE was a tax free paradise. What I'm seeing is it's about the same as here in MD, but since my wife works in DE shes getting taxed double. Ideas!
She should be filing Deleware as a non-resident and than Maryland's taxes as a resident (complete Deleware's taxes first). When she file's Maryland's taxes, she should be given an additional form (502CR) to claim the credit for the taxes she paid to Deleware. I am not sure if filing status makes a difference in the credit (e.g. Married filing separate, claimed as a dependent under spouse, etc.) but it would be interesting to look into further.
Thanks for the info. It looks like she'll have to file in DE and pay what is owed to that state on top of what was taken out already but she'll get a credit on our MD taxes. It seems strange to me to have to pay taxes to DE but as long as she's not getting double taxed and gets it all back in the way of a subtraction from our MD taxes its OK I guess.
My guess is that the H&R Block & turbotax sites don't include that form on the basic tax levels or I need to look a little harder. Perhaps I'll just do our federal taxes electronically and do the state taxes the old fashioned way.
What a PITA! At least I have a few month's to go over this.
Ordinarily, you need to file taxes only in the state of your residence. Any taxes that are withheld in another state should be refunded to you in full, but you'll need to file a return in that state to do so. Any taxes that are actually paid to another state should be credited to you in your state of residence. In practice, your total state tax liability should be the highest of any state in which you nave an assessment, but it doesn't matter which state you pay that amount to.
The paymaster where you work should be deducting taxes according to the schedule for your state of residence only and remitting the funds to that state, leaving you only to file in your state of residence. But if there are no other or very few employees from your state, they might not be prepared to do that.
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