When would the Form 502LU be available in ProConnect Tax for Maryland Filers to subtract Unemployment benefits and COVID relief grants to the extent added in their FAGI?
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Form 502LU is still in development. Per the MD Comptroller's Office, it won't be available until mid-April. I haven't seen any drafts, and I haven't worked with it. And once it is finalized by MD, the software firms will have to integrate it into their software. The software companies are right in that you cannot currently e-file Maryland returns with 502LU - you have to wait until it is there! But paper filing doesn't seem like the right answer. I am putting my affected clients on extension and waiting. (An alternative would be to file now without out subtracting the unemployment benefits, and then filing an amended return later. But personally I do not like that alternative.)
I agree with Alvin. Strategy is to efile the IRS return and extend Maryland. Such incompetence!
The prolonged absence of the 502LU has caused many dislocations, obviously. I've experienced a fourfold increase in Maryland unemployment income because of our Plague.
When you extend Maryland, be sure to explain carefully to your clients, in lay language, what exactly is happening here. Assure them that there just might be a Santa Claus-- in their intermediate future...
Besides the (un)availability of Form 502LU, the problem is that Federal AGI passes over to the MD 502. So if there is $15,000 in unemployment (for example), and $10,200 is excluded from AGI for federal purposes, that MAY have to be added back to Maryland income as an income adjustment - and then the entire $15,000 backed out as a subtraction adjustment. And if federal AGI is under $150,000 (meaning the $10,000 will be excluded) but more than $100,000 (meaning none of the $10,200 is excludable for Maryland), then somewhere there must be another step on the Maryland return. I don't blame the Comptroller's Office for this one - they got this dumped on them on February 16th. I put all of my clients (the ones with with unemployment income) on extension. I hope this is figured out by October 15th!
So, on the 502LU - do we enter just the difference between the $10,200 excluded by Federal or do we enter the entire amount received from Maryland Unemployment? It would seem to me that it should be the total amount received from Maryland Unemployment since there are supposed to be no taxes on the full amount of Maryland Unemployment. Additionally, even though TT is now giving you the option to enter the "difference" it is still giving the message that the state return is not ready to be filed. How can this be? Any idea when it will be resolved?
You carry over the Federal Adjusted Gross Income (FAGI) to line 1 of the Maryland Form 502. That amount already excludes the $10,200. On line 4 of the Maryland Form 502LU you put the remainder of the unemployment compensation, i.e. the amount included FAGI, i.e. the amount above the $10,200. Form 502LU is ready to file in ProSeries.
I talked to State of MD and as of 03/01/2021 they did not have a release date for 502LU. They also could not confirm whether individuals who file non-resident tax returns will be covered by the Act and what form they should use if they are allowed to exclude unemployment benefits.
Suggestion was to file now the way it is and amend later.
I agree with you; filing and amending is not a solution.
My concern is how long it will take MD to release the form and ProSeries to upload it and make it available? State of MD is saying March, but will it be mid March or end of March? Or may be even April with return due by 4/15...
That is crazy. So it won't be available before the deadline most likely. Can we file it and just take as an other subtraction and then paper file? I've been trying the Comptroller's office all week and it always says they can't take my call.
It still isn't available. This is ridiculous. As someone who received a bunch of grants that Maryland isn't going to tax, the option of paying now and "just filing an amendment" isn't exactly doable. That is like me paying the State of Maryland $1500-$2000 I don't owe them and waiting, until, whenever, for me to get it back. What is the point of helping us out with taxes if we still have to come up with money we don't have. I'm sorry, but the way Comptroller Franchot is handling this is a joke.
The Comptroller's Office *had* the 502LU ready within a couple weeks of the governor's announcement. It had been pushed out to tax software providers for testing, and had passed. Then the feds put out their own version of unemployment exclusion, with a different exclusion amount and a different income threshold. Back to the drawing board.
We have a drawer full of returns with MD unemployment. For most of them we've filed the federal and put the state on hold. We call or e-mail each one every couple of weeks to keep them up to date. And since MD pushed the regular filing deadline out to July 15th, there's no need to file an extension. The biggest inconvenience for clients is that they have to sign the EL101 authorization to e-file separately from the federal 8879. They're just happy that we're watching out for them and keeping abreast of the many, many recent changes in tax law.
As to the suggestion for creating another subtraction on the SU, keep in mind that the SU relies on the preparer or individual to determine whether they're eligible for the subtraction. And the state didn't want to rely on people getting this (now more complex) calculation right.
I just heard that the 502-LU is finally available! It’s hard to believe the Comptroller of Maryland’s office has dragged this out so long. Good luck to everyone as we all finally get to complete all of the tax returns we’ve been unable to process!
Form 502LU is available in ProConnect, HOWEVER, it is still not fileable. I've gotten 2 rejections on the same return. 1. stated I had to resubmit after 4/28, I cannot recall the exact reason it gave. 2. on 4/30 I resubmitted and it's now telling me it's rejected for "Please ensure the subtractions reported on Form 502, line 155 are the total amounts of line 8-14. If an amount is originating from the new Form 502LU, which is not yet fileable for MD, please refrain from filing the return until te form is fileable and the electronic filing data has been updated to support the form."
So available, but you cannot file anything with Form 502LU until some unknown future date.