Partial DC Local Income Tax

My daughter continued to live with my wife and I in Maryland after graduating college in May 2019, started working for a company in Washington, DC in June 2019, until January 1, 2020.
On January 1, 2020, my daughter signed a lease and moved into an apartment in Washington, DC, and updated her withholding to withhold DC income tax.
In mid-March, due to COVID-19, her company went to mandatory telework. As she obtained the apartment only to significantly ease her commute, and due to perceived higher risk of COVID in the city, she returned to our home in Maryland at that time. Once she left the apartment around March 15, she did not desire to return to live there unless the company would have mandated a return to the office to work, which did not happen.
She continues to pay rent and utilities on her DC apartment even though she has not spent one night there since mid-March. She continues to have DC income tax withheld.
Her company just informed employees that they are going to encourage telework through at least the remainder of calendar year 2020. As a result, she is signing a new agreement with her apartment management company, her roommate, and a new person who will sign a new lease. This frees her from the lease effective August 1.
Question:
She moved back to Maryland around March 15, and continued to pay rent on her DC apartment through July. She is off the lease effective July 31. Come 2020 tax time in early 2021, does she owe DC a partial year of income tax from January 1 through July 31, or January 1 through March 15 when she physically returned to Maryland and did not spend another day in DC?
Reply to
Dimitrios Paskoudniakis
I do not prepare DC or MD tax returns. The following represents my interpretation of the DC and MD income tax laws. The situation is complicated.
Your daughter maintained a place of abode (a place to live) in the District for at least 183 days. It does not matter whether she occupied it or not for the whole 183 days as the District does not require a physical presence test. As such, the District treats her as a Statutory Resident. They will tax her in the same manner they tax full year residents of the District.
Put simply, she completes the DC D-40 as if she was a resident all year. She receives no tax credit from the District for income taxes she will have to pay MD on the same income being taxed by MD. BUT, the agreement between the District and MD states that it is MD that will provide a tax credit to offset income tax paid to the District on the same income MD is going to tax when the individual is a Statutory Resident of the District.
The open question is How is MD going to treat her? Resident, Statutory Resident, Nonresident, Part-Year resident. My interpretation of the MD law is that based on having a place to live in MD for at least 183 days and physical presence in MD for at least 183 days, she is a resident of MD and files Form 502. She would need to complete the MD 502CR to compute the amount of tax credit for taxes paid to the District on the same income being taxed by MD.
I think what we have here is a case where it does not matter at what point she may have given up being domiciled (your one true home, the place you always intend to return to whenever you are away) in the District (some point between Mid-March and the end of her lease) and reestablished her domicile in MD. She winds up being a resident of both places for different reasons: DC because of a place to live for 183 days and MD because of a place to live and physical presence for at least 183 days.
Hopefully, someone who practices in the MD, DC corridor will see this post and determine how accurate I have been. I have not reviewed any changes to tax law that may have been implemented under MD or DC Covid-19 rules.
Reply to
Alan
For what it's worth, I contacted the Maryland Office of the Comptroller, spoke to several, and they all insisted that my daughter will owe DC for income tax from January through July only, and Maryland from August through December, and that if any jurisdiction writes off taxes owed to the other, it is DC who will credit for tax owed to DC from August through December as a result of taxes owed to Maryland.
Sigh. Sounds like we need to hire a CPA as I want my daughter to withhold accurately starting in August.
Reply to
Dimitrios Paskoudniakis
I have a relative who is a tax professional in New York state, and has had a daughter live part time in DC.
She states: "She could file as a Maryland full year resident and report her wages on a DC non-resident tax return. There should be a spot on the Maryland resident return to get another State's tax credit to avoid double-counting the income in Maryland and DC. Temporary moves such as hers don't count as residency, especially if she didn't change her driver's license or anything. (Comment: she did not change her MD driver's license or voter registration)
Any amount that is paid to DC is a credit on Maryland. She can ask the company right now to stop withholding DC taxes and switch it over to Maryland to minimize the issue but the income won't be double-counted when you take the DC credit on md return."
She also sent me a link:
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and referred me to the section, "Income Taxes Paid to Other States Credit", noting DC is a reciprocal state, so tax withheld to DC can count toward her Maryland tax.
Reply to
Dimitrios Paskoudniakis
You don't have to change your driver's license, or any other overt act, to change residency. Many jurisdictions have statutory residency rules whereby you become a resident as soon as you spend x days in the jurisdiction. I don't know what the DC and MD requirements are, but you definitely need to look at each one's definition of residency carefully.
Ira Smilovitz, EA Leonia, NJ
Reply to
ira smilovitz
[Big snip]
I read all the replies to my original reply. I recommend that you seek a local tax specialist familiar with the MD / DC tax law especially how they determine who is a resident, statutory resident, part-year resident or nonresident. That is going to determine how she files and which of the two tax authorities will provide the tax credit to avoid double taxation on the same income.
Reply to
Alan
I consulted a local tax specialist and he echoed exactly my NY tax professional input:
My daughter should file a DC Non-Resident return and get a full refund She should file a MD return as a full-time resident She should immediately start to withhold MD income tax from her pay Her home is Maryland, and she temporarily domiciled for about 75 days in DC, but was not a "resident" Her driver's license and voter registration were unchanged - she is a resident of my home who stayed in a DC apartment temporarily from January 1 through March 15 before returning home.
Two professionals have now advised this.
Reply to
Dimitrios Paskoudniakis
I have no idea why the local tax reps seem to have disregarded the statutory laws of the District. The Income Tax laws of the District are embedded in Title 47. General Definitions are in Title 47-1801.04. The definition of a resident is at subsection 42 (Title 47-1801.04(42):
(42) ?Resident? means an individual domiciled in the District at any time during the taxable year, and every other individual who maintains a place of abode within the District for an aggregate of 183 days or more during the taxable year, whether or not the individual is domiciled in the District, excluding any elective officer of the government of the United States or any employee on the staff of an elected official in the legislative branch of the government of the United States if the employee is a bona fide resident of the state of residence of the elected officer, or any officer of the executive branch of the government whose appointment was made by the President of the United States and subject to confirmation by the Senate of the United States and whose tenure of office is at the pleasure of the President of the United States, or any Justice of the Supreme Court of the United States, unless the officer, employee, or justice is domiciled within the District at any time during the taxable year. In determining whether an individual is a resident, an individual?s absence from the District for temporary or transitory purposes shall not be regarded as changing his domicile or place of abode. =====================================================================
Please note that the first sentence includes anyone who maintains a place to live for at least 183 days. Note that this somewhat unique as it does not require physical presence. Just about every other state requires physical presence of a certain number of days before they consider you a resident. MD for example has a physical presence test for non-domiciliaries. The District law does not have a physical presence test. If your daughter had no intention of making DC her domicile when she moved there at the beginning of 2019, then she was there temporarily and not a domiciliary of the District. She remained a domiciliary of MD and as such remained a MD resident. But she maintained a place to live in the District where she was employed for more that 183 days. DC even alludes to this rule in their tax form instructions when they discuss which government entity will provide the tax credit to avoid double taxation. They state that if you are a resident by statute and not domiciled in the District, then the state in which you are domiciled should provide the tax credit.
So, unless there has been some District ruling or court ruling that expands on the statute and adds either a physical presence test or excludes from the definition someone who is in the District temporarily regardless of maintaining an abode, she would be considered a statutory resident of D.C.
Now... I'm not telling you to question what the two local tax pros have said. I just don't understand how they concluded she was only a resident of MD because that is where she was domiciled and she was only in DC temporarily.
Reply to
Alan
In article <req8lg$e56$ snipped-for-privacy@dont-email.me,
What leads you to believe that "place of abode" doesn't require at least customarily living there? It's not as simple as counting the nights but the usual definition of "abode" means where you actually live.
We used to own a beach house and even though we owned it all the time, we lived somewhere else.
Reply to
John Levine
I would prefer my daughter pay only DC taxes - they are much less than Maryland for the same taxable income. More money in her pocket.
Maryland's web site also indicates they have a reciprocity with DC. I interpreted either way, and that taxes withheld for DC can be credited to Maryland.
That she was employed for more than 183 days in DC should have nothing to do with her residency status. The 183 days applies to residency, not employment.
I think I need someone to define for me in layman's terms the terms "abode", "resident", and "domicile".
On the date she moved in early January into DC, it was her intent this would be her abode/residence/domicile for the year 2020, with her status for 2021 TBD.
This changed on March 15 due to COVID, about 75 days later. Once her employer mandated to not come to the office, she had no intention of remaining another minute in DC. She returned to our home while paying the DC rent.
I will continue to research this.
Reply to
Dimitrios Paskoudniakis
Maryland Comptroller's Office states my daughter is subject to part-year income tax for August through December (when her lease is terminated in DC). DC Office of Tax and Revenue states my daughter is subject to part-year income tax for January through July (when her lease in DC was active) and agrees that she is subject to MD tax for August - December.
Reply to
Dimitrios Paskoudniakis
There is the concept of "residence" and the concept of "domicile," and they don't always mean the same thing. Different states may define "residence" differently, so someone can actually be the resident of two different places at the same time (well, during the same time period).
Reply to
Stuart O. Bronstein
My daughter is considered by DC to be a statutory resident, and her entire annual income is subject to DC tax, as she maintained an abode for more than 183 days in DC.
MD considers her a part-year resident from August 1-December 31.
She will file a MD return as a part-year resident and include the taxable income earned from August 1 - December 31, subtract a prorated standard deduction and exemption and be responsible for that amount of tax.
She will then file a DC return as a full resident, compute the tax on the entire year income. She will include a copy of her MD return and apply for the amount of MD tax owed as a tax credit on the DC return.
Therefore it is appropriate for her to start having withholding to MD instead of to DC as she has been doing up to now for this year.
For 2021 she?ll be back to a MD resident. Sound right?
Reply to
Dimitrios Paskoudniakis

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