May 9, 2019
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the individual income tax assessment issued to ***** (the “Taxpayer”) for the taxable year ended December 31, 2016.
FACTS
The Taxpayer, a resident of Virginia, worked in Maryland during the 2016 taxable year. The Taxpayer’s employer withheld Maryland income tax, and the Taxpayer filed a Maryland nonresident individual income tax return. The Department received information from the Internal Revenue Service (IRS) that the Taxpayer may have income subject to Virginia income tax. Under audit, the Department issued an assessment for the taxable year at issue. The Taxpayer appeals the assessment, contending his employer withheld Maryland income tax and, therefore, he was not liable for Virginia income tax.
DETERMINATION
Reciprocity
Virginia Code § 58.1-342 B grants the Department the authority to enter into reciprocal agreements with other states to exempt nonresidents from the Virginia income tax when they earn salaries and wages from working in Virginia if such other states similarly exempt Virginia residents. In addition, employers are not required to withhold Virginia income tax from residents of these states. Virginia currently has this type of agreement with Maryland, West Virginia and Pennsylvania.
In this instance, the Taxpayer filed a nonresident income tax return and reported all of his income to Maryland. Under the Reciprocal Income Tax Agreement between Commonwealth of Virginia and State of Maryland (12/7/2006), Virginia residents commuting into Maryland on a daily basis are permitted to have taxes withheld and paid to Virginia only.
If a Virginia resident has Maryland income tax withheld from wages earned while commuting to work in Maryland, the taxpayer should file an income tax return with Maryland in order to receive a refund. Because the Taxpayer was not a resident of Maryland in 2016 and his income from the Maryland employer consisted only of wages, the Taxpayer was required to file and pay Virginia income tax under the reciprocity agreement.
Accordingly, the assessment for the 2016 taxable year is correct. An updated bill will be issued shortly. The Taxpayer should remit payment for the outstanding balance within 30 days of the bill date to avoid any collections actions.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s web site. If you have any questions regarding this determination, you may contact *****, in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1872.A