What if I don't update the State tax form?

Question

I have been working in state Maryland, US for the first 8 months. But I will soon be moving to New York in September.

My company had my State form as Maryland. Since I will be moving to NY next month. What If I don't update my State tax form and let my State tax paid to Maryland?

Answer 1

I am assuming that when you move to New York State, you will still be working for the same company. I am also assuming that when you lived in Maryland you worked in either Maryland or a state that had reciprocity with Maryland.

In the spring of 2019 you would be required by law to file taxes in both states. Maryland will ask you to calculate your taxes for the 8 and a fraction months you lived in their state. New York state will ask you to calculate the taxes for the 3 a fraction months that you lived in New York.

If you don't tell your company to start taking out New York state income taxes, then when 2018 ends you will have had zero sent to NY. When you file in the Spring MD will likely be sending you a refund. The size of the refund will depend on how much was withheld and how much you should have paid.

New York will expect you to pay taxes but becasue you had zero withheld, you may have to write a big check when you file in the spring of 2019. It is likely that you will owe them a large enough payment to trigger penalties(note the years mentioned are from the form from the spring of 2018)

Penalty for underpaying your estimated tax

We may charge you a penalty on the amount of estimated tax that you did not pay or paid late during the year (either through estimated tax payments, withholding tax, or a combination of the two). The penalty you will have to pay will equal the federal short-term interest rate plus five and one half percentage points (adjusted quarterly), but not less than 7.5%.

The underpayment penalty applies if your 2017 withholding and estimated tax payments do not equal:

• 90% of the tax shown on your 2017 return
• 100% of the tax shown on your 2016 return if your NYS AGI (or net earnings from self-employment allocated to the MCTD) is $150,000 or less ($75,000 if married filing separately for 2017), or
• 110% of the tax shown on your 2016 return if your NYS AGI (or net earnings from self-employment allocated to the MCTD) is more than $150,000 ($75,000 if married filing separately for 2017)

Note: Special rules apply to farmers and fishermen. See Form IT-2105.9-I. Instructions for Form IT-2105.9, Underpayment of Estimated Tax by Individuals and Fiduciaries.

If you determine that you underpaid or paid your estimated tax late, you must calculate the amount of your penalty using Form IT-2105.9, Underpayment of Estimated Tax by Individuals and Fiduciaries. Submit Form IT-2105.9 with your return.

Keep a few things in mind:

• If you need the refund from Maryland to afford to pay what you owe to NY, then file your taxes with MD early, becasue they could take weeks to pay the refund.
• If by New York you meant Yonkers or New York City, then you also have city taxes to deal with.
• Part year resident does make the determination of penalties more complex.
• To have your company start withholding NY state taxes you will have to file with your company the NY state version of the W-4 called IT-2104

Answer 2

Technically, yes you would be required to file in both states as partial income for the year. Practically, if your company only put Maryland on your W2, then NY would only complain if somehow they knew you were actually generating the income in NY.