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I am trying to determine if I am going to owe an underpayment penalty on my Maryland state taxes for tax year 2014.

Form 4502UP (http://forms.marylandtaxes.com/current_forms/502up.pdf) states that the form need not be filled out if one of the following is true:

No interest is due and this form should not be filed if:

A. The tax liability on gross income after deducting Maryland withholding is $500 or less, or, B. You have made four quarterly payments as required, each equal to or more than one-fourth of 110% of last year’s taxes.

I think (b) applies to me. I pay my state taxes through employer withholding - I can't say for sure that that sent it all in, but assuming they have sent all of my taxes in by year end, then can't I simply take:

State/Local taxes paid in 2014 through payroll deduction >= 1.1 * 2013 MD State/Local taxes

Right? Am I misreading that?

edit: Correct the calculation to reflect 110%.

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The information you need is given on page 2 of the form that you have linked to. You need to go through your paystubs for the year and calculate the total amount of Maryland income tax withheld up to the due date of the quarterly payment. In fact, most likely this information is listed on each paystub in an entry titled something like Y-T-D Maryland Income Tax Withheld and so all you need to do is look at the last paystub dated on or before April 15, June 15, etc. You do not need to worry about when your employer sent in that money to the State of Maryland; it is the date of withholding that matters.

For Federal income tax purposes, the entire amount withheld can be treated as having been made as four timely quarterly payments of estimated tax regardless of when the withholding actually occurred, no questions asked, and if you meet the 110% of last year's tax criterion, it is not necessary to go into the level of detail that Maryland wants.

  • I thought as much, but years ago this happened to me once. I used turbo tax online and it calculated that I owed a penalty. How could it do so when it does not have access to my quarterly tax withholding amounts? That leads me to believe they used the formula I outlined above. – Mike Dec 17 '14 at 19:13
  • I'm going to accept your answer even with the turbo tax business. – Mike Dec 17 '14 at 22:13

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