Years ago, it was common to have one single address for the duration of your adult life. Today, however, we seem to always be on the move and tend to have multiple addresses. This can make things complicated when it is time to file your state income tax return. If you lived or worked in the state of Maryland at all last year, you will generally be required to file a return and pay your share of state income tax.
If you do not file a return, or choose an incorrect residency status, issues can arise with the state. If the state feels that you have an unpaid tax liability, it can impose penalties, fines, or take more serious action. The Maryland tax attorneys at Gabaie & Associates, LLC can help you resolve your residency dispute with the state. Call us today to schedule a free consultation and learn more.
Why Does Residency Matter?
Maryland wants to collect each and every tax dollar that it believes it is owed. As a result, the state will go to great lengths to make sure that all taxpayers are properly reporting their residency. If you lived in the state at all in the prior tax year, the state will expect you to pay some state income tax. If the state believes that you're trying to shirk your responsibility as a taxpayer by claiming that you're a part-year resident or nonresident, it may seek to impose some harsh penalties.
Residency Status in Maryland
There are three primary residency designations in Maryland for state income tax purposes: resident, part-year resident, and nonresident.
Resident Status: You are considered a Maryland resident if your permanent home (“domicile”) is in the state or if you spent more than half of the year here. For income tax purposes, this means that you were physically present in the state for more at least 183 days.
Part-Year Resident: You are considered a part-year resident if you “entered or abandoned” the state at some point in the year. In other words, if you moved to or from Maryland during the prior year, you will be considered a part-year resident and be required to file a part-year return.
Non-Resident: You can be required to file a Maryland state income tax return even if you do not live in the state or spend a significant amount of time here. You must file a nonresident return if you have income that derives from a property within the state, a business/trade/occupation carried on within the state, or state gambling winnings.
However, you can be exempt from filing a nonresident return if you only earned income in Maryland but live in Pennsylvania, Virginia, West Virginia or Washington, D.C. or your Maryland state income falls below your filing threshold. If you don't have a legal obligation to file a return, at all, you won't have to file a nonresident Maryland return.
Challenging Residency Status in Maryland
If you've filed a federal tax return using a Maryland address, but have not filed a Maryland state resident return, the Comptroller's Office may have some questions for you. Specifically, they'll send you an Information Request letter want you to provide information about where you live and why you didn't file a return.
If you want to dispute the state's belief that you are a resident, you'll have to provide evidence to support the fact that you did not spend 183 days in the state. Receipts, place of employment, other homes owned, connections to the community, and even your child's school can be used as evidence of your residency elsewhere.
The bottom line is that residents and part-year residents will be required to pay Maryland state income tax. If the state has falsely classified you as a resident, it is important to dispute that status. You should not be required to pay taxes to a jurisdiction in which you do not reside or visit frequently.
Call the Maryland state tax attorneys at Gabaie & Associations, LLC for help with your Maryland residency dispute. The sooner you call, the sooner we can help you settle your dispute and avoid the costly consequences of an unpaid tax liability. Call today to schedule a consultation with our team.