DC Taxes Witheld, Live in MD / Estimated Tax Penalty

Maryland (MD) will have a balance due because it is a reciprocal state for DC. You will file the DC return to receive a full refund of any state tax withheld there, because none of your income is taxable to DC.

MD will tax all of your income because you are a full year resident. The balance due penalty will not be removed however, you could ask if they would relieve it because you were unaware of the situation once your return has been filed and accepted.  There are no guarantees because the reciprocal status is very common.

• Reciprocal rules apply only to wages.

When you file the state returns, you will be asked about reciprocal agreements on both. Be sure to select MD as resident and DC as nonresident.