If you earn income in Maryland, your earnings are considered taxable by the state. This applies to you even if you are not a Maryland resident. Wages, tips, salaries, and commissions received from employment are all subject to state taxation. Other forms of income are also taxable, including unemployment compensation, retirement distributions, rental property income, and bank interest. See the tax form instructions for a full list of taxable income sources.http://forms.marylandtaxes.com/current_forms/Resident_booklet.pdf  

While the kind of income you earn may be taxable, you might not be required to file a Maryland tax return. If you earn less than the income threshold to file, you will not be obligated to report your income to the state. It may be to your advantage to file, however, if you are entitled to receive a refund. Details about the state filing requirements are also explained in the Maryland tax form instruction booklet.http://forms.marylandtaxes.com/current_forms/Resident_booklet.pdf 

To start preparing your Maryland tax return, the first thing you need to do is gather all of the tax information you will need to complete the state form. This will include the following:

1. Your Social Security number
2. Your current mailing address
3. Your spouse's full name and Social Security number, if you will be filing a joint tax return
4. The names and Social Security numbers of any dependents you will be claiming
5. Your total earned income for the year - If you are an employee, this will be reported to you using Form W-2 or Form 1099. If you are self-employed, you must add up your gross earnings for the year and then subtract your eligible business expenses.
6. Your total unearned income for the year that is also subject to taxation - Among other things, this includes lottery winnings and capital gains.
7. The total amount of state income taxes you paid during the year - For employees, this will generally be done through withholding from wages and will appear on Form W-2 as state taxes withheld. For self-employed individuals, this will be the total of any estimated tax payments you made.
8. A copy of your completed federal income tax return, if you are filing onehttp://forms.marylandtaxes.com/current_forms/Resident_booklet.pdf 
   

Since you will be using your federal adjusted gross income to begin your Maryland state return, complete that form before you begin your state forms. If you will not be filing a federal return at this time, you may need to consult a tax professional who can assist you to calculate this figure.http://www.irs.gov/pub/irs-pdf/f1040.pdf

Your next step is to obtain a copy of your state tax return and begin working on it. If at all possible, Maryland residents are strongly encourage to file their returns electronically. E-filing eliminates the need for paper returns and can greatly speed up the processing of your return and any refund you are due.http://individuals.marylandtaxes.com/filinginfo/efile.asp 

Most Maryland taxpayers will qualify to e-file online for free using the Maryland Taxes website.http://individuals.marylandtaxes.com/filinginfo/efile.asp If you will be preparing your federal income tax return using tax software, you will generally be given the option to attach your state return for an additional fee.http://individuals.marylandtaxes.com/filinginfo/efile.asp 

The directions that follow will be for paper filing of your Maryland return. If you have access to the Internet, you can download Form 502 "Maryland Resident Income Tax Return" and the accompanying form instruction booklet from the Maryland Taxes website. If you do not have Internet access, you can usually obtain a paper copy of these from your local library during tax season.http://forms.marylandtaxes.com/current_forms/502.pdf 

If you choose to complete your forms by hand, be sure to write clearly and use black ink to reduce any processing delays. Begin the return by entering your full name and Social Security number as well as your spouse's, if applicable. Complete the address section, select your filing status, and enter the number of exemptions you claimed on your federal return. Fill in the names and Social Security numbers of all of your eligible dependents.http://forms.marylandtaxes.com/current_forms/502.pdf

Before you continue with the form, stop and read the tax form instructions carefully. Be sure to pay attention to the sections regarding income adjustments and state tax credits. Income adjustments are additions and subtractions you may need to make to account for income that is taxable by the state of Maryland but not by the federal government or vice versa. Any state tax credits you are eligible to claim will directly reduce the total state tax you owe.http://forms.marylandtaxes.com/current_forms/Resident_booklet.pdf 

Continue the form by transferring the amount of your federal adjusted gross income from Form 1040 to line 1 of your Maryland return. Then separate your earned income and enter that amount on line 1a. For lines 2 through 17, you will make any income adjustments that apply to you. Consult the tax form instructions for complete details. On line 18, you will arrive at your Maryland adjusted gross income.http://forms.marylandtaxes.com/current_forms/Resident_booklet.pdf 

Subtract the standard or itemized deductions from your federal return as well as your total exemption amount to calculate your net taxable income on line 22. Now check the tax table located in the instruction booklet to assess the amount of state tax you will owe on your taxable income. Enter this amount on line 24.http://forms.marylandtaxes.com/current_forms/Resident_booklet.pdf 

Deduct all of the state tax credits you are eligible to claim on the following lines to find the total state tax you owe on line 30. On lines 31 through 35, you will figure the amount of local tax you owe, if any. Add the local and state tax together to see the total tax owed on line 36. Then subtract the state taxes you have already paid through withholding or estimated tax payments. What remains will be either a balance due on line 46 or a refund on line 47.http://forms.marylandtaxes.com/current_forms/Resident_booklet.pdf 

If you are due a refund, you can choose to receive your payment via direct deposit by entering your bank account and routing numbers on the form. Sign and date the completed form and have your spouse do so as well, if applicable. Make a copy for your records. Then, send off the return with a check or money order for any payment due to the address listed on the form. Be sure to submit it by April 18, 2011.http://forms.marylandtaxes.com/current_forms/Resident_booklet.pdf

If you will not be able to file your return before the April 18 deadline, see how to get a state tax extension in Maryland.

Disclaimer: The content in this page is not a substitute for professional financial advice. Please contact a finance professional before using the information presented here.