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ABC Accounting Group
ABC Accounting Group, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 664
Experience:  Business Consultant/Accounting Manager
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I have been working on a couple of different freelance

Customer Question

Hi!I have been working on a couple of different freelance projects for the past few months and am looking to lower my tax liability and become a resident of South Dakota.I do not live in South Dakota and am temporarily living in Maryland. However, all of the work that I do does not take place within the State of Maryland but in the District of Columbia or abroad.If I become a resident of South Dakota while residing in Maryland, would I have to pay Maryland income taxes?Or would I be better of starting a LLC in South Dakota - or would that still require me to file and pay taxes in Maryland?
Submitted: 10 months ago.
Category: Tax
Expert:  ABC Accounting Group replied 10 months ago.

Hi. If you lived in Maryland on the last day of the taxable year, or you maintained a place to live in Maryland, and were physically present in Maryland for more than six months of the tax year, then you are a legal resident and have to fill out a Maryland return.

Expert:  ABC Accounting Group replied 10 months ago.

The District of Columbia, due to its unique nature as the seat of federal government and attractiveness to out-of-state workers, has reciprocity with all states, including Maryland.

Expert:  ABC Accounting Group replied 10 months ago.

Four states (Nevada, South Dakota, Washington, and Wyoming) do not have a corporate income tax. However, if you are a resident of Maryland (i.e. the residency requirements), the income from the LLC would pass through on your personal income tax return.

Expert:  ABC Accounting Group replied 10 months ago.

Have a great day. Please let me know if you have any questions. If you do not, then a positive rating is appreciated so I get credit for the response. Thank you.

Customer: replied 10 months ago.
even if I were to register to vote in South Dakota, have a drivers license from South Dakota, I still would need to pay Maryland tax?If I were to move out of the country (which I will in a few years) would I have to still consider myself a Maryland resident for tax purposes or would I be considered a South Dakota resident?I am only in the DC area on temporary assignment
Expert:  ABC Accounting Group replied 10 months ago.

Hi.

For the first question, yes - if you lived in Maryland on the last day of the taxable year, or you maintained a place to live in Maryland, and were physically present in Maryland for more than six months of the tax year.

If you did not meet any of the above requirements and moved from Maryland to South Dakota, it would help. States that have no state income tax at all are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. If you did not live in Maryland during the last day of the taxable year, you would need to have "physical presence" in that state to pay Maryland income taxes.

Expert:  ABC Accounting Group replied 10 months ago.

Have a great day. Best Regards.