Baltimoresun.com's tax advice column features three experts from the Hunt Valley accounting firm SC&H Group answering questions about preparing a return. Here is an edited excerpt of this week's column:
I am already claiming my two kids and myself. I always get a refund at tax time. How can I readjust my taxes so that I get more every pay [period] and do away with the year-end refund? I am in the process of purchasing a home, and the extra money could go to mortgage payments.
- Dexter, Baltimore
You should increase the number of withholding allowances you are claiming on your wage income, which will decrease the amount of tax withheld from each paycheck. You do this by completing withholding tax forms and submitting them to your human resources department.
Since you stated you will have a mortgage, this will likely mean you will have more deductions in 2006 than in 2005. Keep that in mind when choosing the number of allowances you claim when altering your withholding. There are worksheets with those forms that can help you.
I am a college student who lives in Maryland, but I worked an internship over the summer in Delaware (while living in Maryland). I can be claimed as a dependent and made around $10,000 total ($7,000 from the internship). I also received a [Maryland] and a [Delaware] W-2 form from the company I worked out of state with.
My federal tax return was $500, while my Maryland taxes say I owed $500, but I think this is because it does not take into consideration the money that I have paid to the state of Delaware. Should I owe this much, or how can I file my taxes without losing this much money? I have never owed state taxes before. Also, do I have to file these for Maryland and Delaware? Thanks.
- Jeff, Salisbury
The first answer is yes, you will need to file in both Maryland and Delaware. If you earn income in another state, and you pay income tax to that other state, Maryland will allow you a credit for those taxes paid. This is to avoid having Maryland residents pay state tax twice on the same income, as Maryland residents pay Maryland tax on all of their income, regardless of where it is earned. Complete Form 502CR and attach it, along with a copy of the completed Delaware return, to your Maryland return.
As an aside, for students and employees working in the neighboring states of Pennsylvania, Virginia and West Virginia, and in Washington, D.C., this issue is avoided, as those jurisdictions have an agreement not to tax wage income of each other's residents. Delaware does not have such an agreement with Maryland.
If one's spouse was living in a nursing home for the entire calendar year of 2005, can the couple file as married filing jointly on their tax return?
- Bernie, Staten Island, N.Y.
As long as you were married at the end of the tax year, you may file jointly. This is true even if you did not live together at the end of the tax year.
I have a 21-year-old son living with me who did not work a portion of 2005. Can I claim him on my tax return?
- Fran, Baltimore County
Since your son is over [the age of] 18, you can only claim him as a dependent if he was a full-time student for at least five months during 2005 or disabled.
To submit a question or read columns online, go to www.baltimoresun.com/taxtalk.