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Update - 2nd New MD Tax Form Coming

dascpa
Level 8

Besides the new 502LU for MD Unemployment subtraction the Comptroller's Office just announced a new Form 511 for certain pass-thru entities claiming the new resident pass-thru entity tax.  They are requesting (too late) to hold off on filing tax returns until this is created (hmm due date is two weeks).

I understand all this COVID stuff but changing / adding tax forms and tax laws DURING tax season is just plain unfair to us practitioners.

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15 Replies 15
sjrcpa
Level 15

Do you have a link to this announcement? I can't find it.


ex-AllStar
dascpa
Level 8

No.  It was forwarded to me by another CPA who is part of the MD Comptroller forum or something like that.  It's only an hour or two old so the Comptroller's website isn't updated yet.  See below.

 

The Comptroller’s Office is in process of creating a new form, 511, for SOME pass-through entities = if your clients are impacted, they request that you PLEASE DO NOT FILE USING THE OLD FORM 510 BUT WAIT FOR THE NEW 511 which will apply to:

  • if the client plans to make the election for Maryland PTE tax with respect to shares of ALL members (i.e. in order to take the position on the member’s federal return that the state tax is an entity tax and is therefore not subject to the $10,000 SALT deduction cap on the member’s individual return)

OR

  • if the client had previously planned to make the election and therefore paid in tax for the entity, but now after further review the entity DOES NOT want to make the election (e.g. some have researched the treatment in the nonresidents’ resident state and determined that the credit treatment is harmful)

If the client is not impacted in either of the above categories, i.e. they are paying tax only with respect to nonresidents WITHOUT the new election (and the tax will therefore be treated as “on behalf of” the nonresidents (aka withholding) )= you can file using the existing 510 and don’t have to wait.

Still some complications to work out with respect to the new 511 and several of us are working on that with the Comptroller’s Office. Yes it has turned out to be way crazier than anyone had ever envisioned. Hang in there. We’re all working as fast as humanly possible.

Note that the whole premise of the Maryland change was to BENEFIT the client with a bigger federal deduction and therefore federal tax savings. You may want to remind them of that when explaining the delay and the possible desire for extending the returns.

dascpa_0-1614629884824.jpeg

 

sjrcpa
Level 15

thx


ex-AllStar
dsocpa
Level 4

As I understand the MD form 502LU will be used to report the local grants eligible for exclusion as well as the unemployment.

0 Cheers
StacyStacy
Level 1

Does anyone know how to subtract the Maryland non-taxable grants on the S-Corp tax return?  I see that there is a 502LU for personal and a 500SU for Corporations - but how does the S-corp take this subtraction??

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sjrcpa
Level 15

I think it's going to get passed thru separately on the K-1s.

But then the LU spot for it says you have to attach the 1099, which of course the shareholders won't have. MD once again did not think this through.


ex-AllStar
StacyStacy
Level 1

Agreed.  It says on the MD website that it has to pass through on the K1, but that makes no sense and there is no place for it.  If we include it on the 502LU, then the 1099 from the State will be corporation name.  I suppose push comes to shove I can include it on the 502LU and just show the shareholders portion - but honestly that can't be correct.  I'm hoping that they will make some kind of adjustment for this in the next week.

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Julia74
Level 2

For S corporations it will be on MD K-1 Part C line 5.  List the detail of the actual grant names.  Then on the personal these will be included on the 502SU and no 1099's need to be included since it is from the pass-through entity.  Individuals have to use the 502LU for grants they received and are required to have the 1099..

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BarbR
Level 2

Has anyone heard any update on the ETA of Form 511?  State Website mentions nothing of it.

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dascpa
Level 8

MD set out an alert on this.  It says "soon".  Hope that narrows it down for you.  Actually, now we know why MD extended to 07/15 versus the 05/17.

Having gone through the new PTE stuff with resident, nonresident, and a combo of both I can tell you it's a nightmare so I understand why the Comptroller's office needs to time to figure this new law out.

There will also be a way to reverse your election if payments were already made on the PTE.

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Solk
Level 3

Any update on the 511?  Do you have a link to any comptroller pronouncements?

 

To those asking about the MD grants, Lacerte shows an entity Form 500LU form as 'unavailable'.  Does anyone have a status update on this form?  I assume that if there is an entity Form 500LU (for which a 1099 should have been received),the subtraction would then get divvied out on the MD K1s.

 

To those who received MD loans that were converted to grants (COVID-19 Emergency Relief Loan Fund), that conversion took place in 2021 (despite the governor's announcement of the conversion in December 2020) and you'll therefore receive a 2021 1099, with a MD subtraction in 2021. 

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dascpa
Level 8

Supposedly the Comptroller will release Form 511 on June 15th.  ProSeries will take time after that.  We did get one notice from ProSeries that when this happens the update will dramatically change the file and we cannot go back to review what was there before.  No clue but I expect a clusterf**k.

 

BarbR
Level 2

I contacted the Comptroller's office a week ago via their Facebook page.  They advised that the MD Governor has not yet signed the Senate Bill regarding the change.  Therefore, Form 511 is not in process yet as they are waiting for the Bill to be signed into law.

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sjrcpa
Level 15

Over Memorial Day weekend it was announced that SB787 will become law without the Governor's signature. Yesterday I heard Form 511 will be released June 28.

https://governor.maryland.gov/wp-content/uploads/2021/05/EWS-Senate-Bills-FINAL-2021.pdf


ex-AllStar
dsacpa
Level 2

Now that the Form 511 is released by MD (https://marylandtaxes.gov/forms/20_forms/511.pdf ) does anyone know when ProSeries will have the form on our software?