employer paid tax to wrong state

[jkpenrod]

Virginia-

My wife moved from Maryland to Virginia about this time last year. As soon as she learned of the move she contacted her employer's payroll so they could apdate the information. The first pay check of 2010 the had partially updated the address (no apartment number) , but had left taxes paid in Maryland. my wife contacted payroll about the errors and waited a month, she gets paid monthly, for the next paycheck. same error. finally by the 3rd or 4th pay check they had correct the address, but still had taxes being paid in Maryland. By the 4th or 5th they had stopped paying Maryland taxes but were paying DC taxes. It was not until the 5th or 6t pay check they finally were paying taxes to Virginia. My widfe contacted payroll after recieving each paycheck and for the last one or two she mentioned to her employer that she is inclined to come back to them for any fees associated with filing taxes this year, her employer in no way acknowledged this. As we move into the tax season I know we are going to have to file in all three states, something we wanted to avoid by moving her at the end of the year. but I am concerned we are going to get hit with penalties for underpaying in Virginia. My question is what legal recourse do we have with the mployer with they do not want to assume any responsibility for taxes being paid to the wrong state?

 

[tranquility]

Why are they withholding where your wife lived rather than where she worked?

But as to your question, no. The employer has no duty to you for having to file more than one return.

Also, I am uncertain as to why you think you will have any penalties.

 

[davew128]

Why are they withholding where your wife lived rather than where she worked?

Without looking, it may because there is a reciprocal agreement between those jurisdictions. I know there are a lot of them with the mid-atlantic states especially with regards to wages.

Also, I am uncertain as to why you think you will have any penalties.

Again, without looking, it would depend on the various tax rates of the states involved and what state the wages are earned in. Its actually a good proactive question to ask, but would be best answered by a tax pro who lives in that area and is familiar with the laws of those states.

 

[jkpenrod]

Without looking, it may because there is a reciprocal agreement between those jurisdictions. I know there are a lot of them with the mid-atlantic states especially with regards to wages.

Again, without looking, it would depend on the various tax rates of the states involved and what state the wages are earned in. Its actually a good proactive question to ask, but would be best answered by a tax pro who lives in that area and is familiar with the laws of those states.

Absolutely correct DaveW. I have already contacted HR Block representative that specializes in multi-state and ex-pats (my wife is a British citizen and not American citizen). They are the ones that said there is a chance of penalties for underpaying, but I am not 100% certain. As to the question of which state taxes are paid to, there is reciprocity between Maryland, Virginia and DC so taxes are paid to the state of residence not to the state you work in. very different to what I am use to growing up in Georgia, but that is the way it is.

This may all be a moot point if we have no penalties, I am not so concerned about fees we incur just for filing, just trying to get some information on the chance that there are penalties to the state. Again my wife did everything she could to correct the situation, her employer dropped the ball and I am not keen on the idea of us paying penalties for their mistakes. again, if there are no penalties it is all a moot point.

Thanks for the responses.

 

[Zigner]

Absolutely correct DaveW. I have already contacted HR Block representative that specializes in multi-state and ex-pats (my wife is a British citizen and not American citizen). They are the ones that said there is a chance of penalties for underpaying, but I am not 100% certain. As to the question of which state taxes are paid to, there is reciprocity between Maryland, Virginia and DC so taxes are paid to the state of residence not to the state you work in. very different to what I am use to growing up in Georgia, but that is the way it is.

This may all be a moot point if we have no penalties, I am not so concerned about fees we incur just for filing, just trying to get some information on the chance that there are penalties to the state. Again my wife did everything she could to correct the situation, her employer dropped the ball and I am not keen on the idea of us paying penalties for their mistakes. again, if there are no penalties it is all a moot point.

Thanks for the responses.

So, your wife MUST have made estimated tax payments to the correct state in the amount she knew she may be short...that MUST have happened some time in the last 10 months, right?

 

[davew128]

So, your wife MUST have made estimated tax payments to the correct state in the amount she knew she may be short...that MUST have happened some time in the last 10 months, right?

Ordinarily its not a reasonable course of action. People who earn there income through wages DON'T make estimated payments, as it would completely invalidate the point of withholding in the first place. Moreover in this instance at least from a tax payment standpoint it would truly be double taxation until the return is filed for the state wages are earned in when the withholding is refunded.

OP, I think the problem here is the payroll department. Presumably they are not equipped to deal with payroll filings in states other than the one they operate in and I do not know if you can force them to file in Virginia. If they cannot or will not change the state of withholding I would suggest she stop withholding in Maryland/DC and as Zigner suggests start making estimates to Virginia. Not a perfect solution but if the employer can't/won't do it, your options are limited. Given the number of cross state employees in that area, I am somewhat astonished that they do not simply fix the problem.

 

[tranquility]

While Maryland and Virgina do have a reciprocal agreement, the legal result if you file the proper forms is that the employer is not required to withhold in the state where the person is employed. They are not required to withhold for the state of residence.

 

[pattytx]

Not exactly, tranq. Although MD and VA DO have a reciprocal agreement, taxes must be withheld in one of the two states, unless the employer does not otherwise have nexus (a business presence) in the employee's resident state AND the employer completes a revised MW-507 as appropriate.

So let's clarify.

OP, when your wife moved her residence to VA, did she continue to work in MD, or did she also begin WORKING in VA at that time?

Does the employer have a business presence in Virginia? If so, did she complete MD form MW-507 declaring that she lived outside of Virginia?