Income Tax Help- Newly married move to different state?

Question

Here is the deal-- does anybody know how I should file taxes for my particular situation? I have worked in VA all 2006 but in Sept. I got married and moved to MD where my husband lives but kept my job. Since then I have paid MD taxes.
When my husband and I went to HR Block to file they were very confused by the situtation and did not know how to file.
When we tried to file joint married They said that I have not paid sufficient income tax for MD so I owe $1400!!! The thing is I was not living in MD all year to pay all those taxes I was paying taxes for VA. Also if it is done the other way around My husband owes alot of money to VA...but he never lived in VA!!!
Can someone help me or point me in the right direction? We tried to file seperatley but they tell us its the same deal. I have gone to the IRS website but found no help.
We are hoping to file jointly so I can use the hope scholarship credit.

Answer 1

My limited research indicates that yes they expect you to file a "resident" return (Form 502) but you prorate / allocate your income between your states of residency.

There is also the reciprocal agreement between MD and VA that needs to be addressed along with your change in residency.

In no case do I believe VA has any right to your husbands income if he never worked or lived in VA..

Shooting from the hip (without considering the reciprocal agreement's affect):
Federal return MFJ
VA return: MFJ reporting solely your income while you were a resident (possibly on a part year return)
MD return: Form 502 MFJ reporting all your husbands income and yours after you moved to MD.

Answer 2

Here is how MD taxes work....if you were domiciled (i.e. have a permanent home) in MD on the last day of the year, you are considered a full year MD resident, subject to tax on your income for the full year.

So, it looks like you will need to file a joint MD resident return for the full year, and you will pay tax on all of your husband's income and all of your income for the year. But you will also file a VA part year resident return and treat just your wages from Jan to Sept as VA source income. None of your husband's wages will be considered VA source. On your MD return, you will need to file Form 502CR in order to claim a credit against your MD taxes for the VA taxes you paid.

FWIW, the person you went to see at H&R Block is a moron. Although I am a CPA, I've never done either a MD or a VA return, but after 10 minutes of reading the form instructions, I was able to figure out what you need to do.

Answer 3

If H & R Block can't figure that one out, you need to find someone else to do your taxes.

You file partial year taxes in each state you lived in. You would file in VA for the first 8 months of the year and in MD for the last 4. Your husband files in MD for the entire year. You are not going to be filing a joint return on state taxes this year. This is for your State Returns only. Your Federal return is going to be the same no matter what state you were in.

It does not matter that you live in MD and work in VA. The states have reciprical agreements. I used to live in PA and worked in MD and I always filed in PA because that was my state of residence.

Go back to H & R Block, since I assume you are paying these people for their non-expert advice, and get a different tax preparer, hopefully one that is a CPA or has half a brain. Either that or go buy a copy of Turbo-Tax and do them yourself.

P.S. I just went to the Maryland State Tax website and it says:

If you are a part-year resident, you must file a Maryland income tax return using Form 502. You may also be required to file a return with your other state of residence.

Filing a part-year return in your first year of residency may help you avoid receiving a notice asking why you did not file with Maryland the previous year.

Answer 4

Look, I had a similar situation, married in one state then moved in Sept to my current state. Federal shouldn't make a difference. File Married filing jointly.

When it comes to your State Taxes there is an option for PART YEAR residents (this is you!) and you should file this way for both VA and MD. Check with your State Tax information -- for instance in my state they calculate what I would owe based on our total income as if we lived in the state for the full year, then they say you would owe a total tax of X, but since I only made 30% of my income in this state my tax liability would be 30% of X.

That's scary that a place you are PAYING to do your taxes doesn't know what to do with part-year residents! Find someone else to do your taxes. If you got married you should be getting a LARGER refund this year because you were probably claimed as single on your W4's at least for part of the year.

Answer 5

I don't know what the VA rules are now, but when I lived there as a military domiciled in TX, my wife and I had to file separate VA returns to avoid VA tax on my military pay. We filed a joint Federal return, no problem.

Basically you need to file a part-year return with MD, claiming ONLY the income you earned while living in MD. You'll need to do the same with VA, listing all income earned in VA.

You'd probably be well served by consulting with a CPA familiar with the nuances of VA taxes. They can be a pain in the back, from personal experience. Stay away from Block, as you have discovered.

Answer 6

Ask for the supervisor at H & R Block. Something is very wrong. They should show you as a part time resident in Va and a part time in MD. IF H & R Block was confused, then you need another tax person from that office to look at your situation.

Answer 7

1st where are you the legal resident in what state? then have to file a state return for that state. 2nd you will file a joint federal taxes return.your best bet is to file a joint return for your fedral taxes and then turn around and file joint returns for the state taxes in the long run you may not owe any money after ded. and credits. ashk ypur taxes preparer if he/ she knows how to file state taxs returns very important o by the way make sure that your tax person has been doing taxes more thatn one year.

Answer 8

1. Don't pay H R Block.
2. Go to a real accountant.

Answer 9

Geez, yet another H&R Block story! Try a real accountant - this is hardly a unique situation. It's very common to live in one state and work in another, or to work in multiple states in the same year whether you live where you work or not.

Answer 10

Phone the IRS and talk to someone or go down to one of their offices. American income tax is so stupid. I Live in Canada and file one tax report. It covers provincial and federal, even if I worked in every province. I don't know about yours but ours ask us what was your situation on Dec 31. Over here you would file for the province you are/were living in on that day.