Maryland Pass Through Entity Tax Situation

[Chuck202020]

For years I have used Turbotax to do our family's taxes.  This year we have a large K1 distribution and needed to attach a Maryland 510/511 to our return.  This meant that we could not file electronically as we have historically done and needed to file paper returns to Maryland, which we did.

The Turbotax program asks questions and we answer and fill in data points on the state return based upon items in certain areas of each numbered item.  Electronically, the system shows we have a $700 ish refund due back to us.  When we sent in the paper return, the state of Maryland reversed a $2000 ish item called pass through entity tax paid on member's pro rata share of income.  

The Turbotax application treated this as a taxed amount already paid, but the State of Maryland is looking for us to pay the $2000 ish that looks like we already paid based upon the K1 and the MD 510/511 form that the Turbotax application created and had ready for us (but that we had to print and submit paper based).

Does anyone have clarity regarding this?

Thank you

[tagteam]

I am going to page @Rick19744 but you may have to contact Support with respect to how it was treated by TurboTax.

How do I contact TurboTax? (intuit.com)

Otherwise, entities (partnerships/ S corporations) sometimes fail to pay the PTE tax after they elect to pay it even though they're initially liable to do so.

[Rick19744]

A few comments:

• There are too many questions for this to be properly addressed in a forum such as this.
• There can be differences in how this is handled at the entity level depending on whether the member's are all nonresidents or a combination of resident and nonresident.  
• This PTE has been modified for the 2023 tax year, so keep that in mind when you prepare the 2023 tax return.
• I believe part of the issue is that you needed to paper file the tax return.  That can lead to input errors when entering this at the state level.
• I agree with @tagteam in that you should check with the company to make sure that the PTE tax was in fact paid.
• If the PTE was in fact paid, this may just require you to respond to Maryland with a letter informing them that you disagree with their change and include support for the PTE.  Make sure that you only claim your share of the PTE.  State agencies do make mistakes, so your issue could just be a simple input error on their part.
• I'm not convinced at this point that this is a TT issue.  I believe some of the dots have not been properly connected at the state level.  But once again, without seeing any documentation, forms, etc. it's hard to provide much more assistance.

[LG2024]

I had a similar situation, and turns out that we must attach K-1 schedule to the paper return (similarly, they said, as we need to attach W2s). Otherwise, MD does not record taxes as being paid. After I submitted K-1 forms, the problem was resolved. Then they came back to me with the same question about the prior-year return. Again, I submitted K- forms, and never heard from MD again.

[Tjo716]

Good morning-

Similar situation for me this year ...thanks for posting.

Why can you not file electronically when there is a K-1?

Also, if the entity (LLC) paid estimated MD taxes, how/where do you "deduct" the increased MD tax after entering the K-1 data?

Thanks

[PatriciaV]

Does the federal Schedule K-1 have an amount for Box 12 or 13 with Code ZZ for state taxes? If you complete this entry accurately, the amount should appear on your state income tax return as other tax payments.

@Tjo716 

[jkwiggins]

My husband and I received Maryland Schedule K-1 510/511 forms with our K-1s this year. We both work for the same company. Why can't our return be filed electronically? I cannot find anything online that states it cannot be filed electronically.  We had 510/511 forms last year and filed electronically. 

[Tjo716]

Hi Patricia-

There is no entry in Box 12 or 13.  Does this mean the K-1 is incorrect given estimated tax payments to the State were made?

Thanks

[PatriciaV]

Not necessarily. The PTE tax paid on your behalf should be reported on the Maryland Schedule K-1 Section D Line 2. If this line is blank and you know that tax was paid, you'll need to contact the company that sent you the K-1 for help.

@Tjo716