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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I am a resident of CA. I work as a consultant and am currently

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I am a resident of CA. I work as a consultant and am currently in MD mon-Thu, on Fri in CA. I see that both MD and CA state taxes are being deducted on my paycheck.
Do MD and CA have a reciprocal tax agreement to avoid double taxation?
What is the process to correctly file taxes for MD and CA to avoid double taxation?

Hello Customer,


CA and MD do not have reciprocal agreements.


You will file a return with MD as a nonresident, and you will pay taxes to MD on the income you earned working there 4 days per week. You will then file a resident return with the state of CA and report your total income for the year. But CA will then allow you a credit for the state taxes you already paid to MD, thereby eliminating or reducing double taxation at the state level on that same income.



Thank you Customer



Customer: replied 7 years ago.

Do any of the Turbo tax products helpful with file such tax returns or is it better to work with a tax consultant?


How do you apply for a credit? Is it done on the same return?



Hello Customer,


Turbo Tax will work just fine in this situation. When you go through the TT interview process, it will ask you if you need to file more than one state return. Once you answer yes to that question, it will guide you through breaking down the income you had from each state, and will automatically apply the proper credit to your CA state return.


The credit is actually taken directly on your CA return. You will report all of your income on your CA return since that is your resident state, and your tax will be calculated on the total income amount. But then the tax you paid to MD will reduce the amount you owe in CA.



Thank you Customer



Customer: replied 7 years ago.

In MD, taxes are being withheld under single status where as in CA I am correctly set up as married. So I am assuming when I file my taxes for MD, I should file as married for the appropriate credit or should I request payroll to correct my filing status for MD?

Hello again Customer,


The filing status that you claim on your W-4 form only affects the amount of tax that is withheld from your check. It has no affect on the actual tax that you will owe.


I would wait until you complete your returns to see how much tax you actually end up owing to the state of MD or to see if you have a refund coming before deciding whether or not any adjustments need to be made to your payroll withholding.


If this was helpful please press the Accept button.


Thank you Customer



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