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.
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)
- 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.
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.
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..
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.
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.
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.
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.
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.