Solved: Why is MD state asking for a payment on income taxes for an S Corp?
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Level 14

Why is MD state asking for a payment on income taxes for an S Corp?

Are any of the S-Corps' shareholders nonresidents of Maryland?  Payment of the Maryland income tax is not required with the filing of Form 510 unless the pass-through entity is subject to the nonresident member tax.

According to the Comptroller of Maryland's website :

Nonresident members.

If a pass-through entity has a nonresident member and any nonresident taxable income, then the pass-through entity is subject to the Maryland income tax. The pass-through entity is taxed on the nonresident taxable income, which is the sum of the nonresident members' distributive or pro-rata shares of the pass-through entity's income allocable to Maryland.

A "nonresident member" includes a nonresident individual member (defined as a person or fiduciary) and a nonresident entity member. A nonresident entity member is a corporation or pass-through entity that is not qualified or registered with the Maryland Department of Assessments and Taxation to do business in Maryland or not formed under Maryland law.

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Why is MD state asking for a payment on income taxes for an S Corp?

I am a non-resident of Maryland, resident of CO, BUT I am paying Maryland state taxes every month AND I file a Maryland personal/individual state return each year which has the 5.75% normal state income tax PLUS the non-resident 1.75% tax which you are mentioning. I would *have* to if my S Corp business operates partially in MD. I can't have the business pay a corporate tax anyway - it is a pass-through entity. I have to pay all the MD taxes for the business income and my own wages on my personal/individual return. Otherwise I am getting taxed twice for the business income.

The quote from the website above says that I have to pay MD income tax - that quote from the website does not anywhere say that I have to file that tax on the 510 (business return). As long as I pay it on the individual return, it should be fine? In any case, it is a pass through entity, and such entities aren't suppose to pay any tax on their business returns - always only on the individual return - it is so for the 1120S and the Colorado 106 (which is where I reside). TurboTax is telling me that I have to pay this on the 510D, and has prepared a voucher for me and everything. Please confirm that if I am paying this 5.75% MD state tax plus the non-resident 1.75% MD tax on my personal MD return on everything including the business side income, then I am good to not pay it on the 510 for MD.
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