Employer Withholding Requirements & Income Sourcing

Employer Withholding Requirements

Maryland employer withholding requirements are not affected by the current increase in teleworking because tax-ability is determined by the employee’s physical presence.

Employer withholding is generally required for employees who are:

  • Maryland residents
  • Maryland non-residents receiving Maryland-sourced income
    • Maryland- sourced income:  compensation for services performed in Maryland
      • Teleworking in Maryland is Maryland-sourced income

Virginia, Washington D.C., West Virginia, and Pennsylvania have reciprocal agreements with Maryland – employees who earn compensation for services performed in Maryland are exempt
from Maryland state income tax (thus no withholding)

Delaware does not have a reciprocal agreement with the state of Maryland thus compensation paid to a Maryland nonresident who is teleworking in Maryland is Maryland-sourced income, and therefore, subject to withholding.

Nexus and Income Sourcing

The Comptroller of Maryland’s Office will continue to apply the methodology consistently historically used to determine nexus or income sourcing. Temporary COVID 19-related changes to a business’ workplace model and employee deployment will not be considered to change business income sourcing and employer withholding requirements.

View the full FAQ

Questions? Contact us at COVID19relief@hertzbach.com