Maryland State Tax

[momekane]

Form 502UP completion appears to be incorrectly calculated by Turbo Tax.

[BillM223]

Unfortunately, we in the Community cannot see your private tax data.

Can you give us a general idea of what you think is being calculated incorrectly, and then actual lines and columns and dollar amounts so that we can see if we can identify the issue?

[momekane]

I paid estimated quarterly taxes that totaled more then actual tax due, giving me a refund.  Form 502UP should only be completed if taxes due are more then $500 after taxes withheld or paid through quarterly tax estimates are applied.

1.   I had no taxes due but the form was completed.

2. In addition to 1 above,  your calculations are being done incorrectly, causing money to be substracted  from my refund.  

Instruction 11 says to divide total income by 4 quarters which should give the same 25% amount to each quarter. Your calculation shows 25% total, 50% total,75% total, then 100% then based the amount of estimated taxes that should have been paid each quarter on those percentages.  I paid the same amount each quarter, so 25% of taxes paid to 25% of income should have generated 0 on line 17 of form 502UP.

[AmyC]

1. Please take a look at your form and let's talk through it.

At the top of the page, below your name is a section for No interest due and form should not be filed

Maybe one of those boxes is checked?

2. If not, let's keep going.

• Line 11 says to divide income by period. The time periods are Jan- Mar, Jan-May, Jan - Aug, Jan - Dec. 
• Line 12 has the amount of tax due based on the line 11 period.
• Line 14 has the payments made, those should be also adding up, like line 11 income and line 12 percentages.

You state that yours is not adding up. For example: $300 paid each quarter on line 14 would look like:

$300   $600   $900   $1200

multiplied by the percentages

25%    50%    75%      100%

The question is why does yours not become cumulative? Please review your entries.

[momekane]

1-  There is no way that my return should have gone to form 502UP. Neither A or B apply to my return. This form is for underpayment of withholding and/or estimated taxes collected.  I didn't have an underpayment, I have a refund due.  Option A says taxpayer needs to pay more then $500 tax due.  Option B questions if quarterly payments were equal or more than 110% of last years taxes.  Line 10 is the result of determining if Option B is true. My line 10 is the result of the required minimum calculated that should of been collected during the year. I paid over $900 more then the calculated minimum.

2- It appears that the amounts on line14 are not being calculated correctly. The first quarter payment is not being added into the second and third quarter amounts, it is included in the fourth quarter total.

[BillM223]

I'm going to need your help to get more information. Please send me a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the directions below:

***Online Product***

1. Sign into your online account.
2. Locate the Tax Tools on the left hand side of the screen.
3. A Drop down will appear. Click on Share my file with agent.
4. This will generate a message that a diagnostic copy will be created. Click on OK, the tax file gets sanitized and transmitted to us.
5. Please provide the Token Number that was generated onto a response to this thread.

***Desktop Product***

1. Click into your return.
2. Click Online and select "Send Tax File to Agent".
3. This will generate a message that a diagnostic copy will be created. Click on OK, the tax file gets sanitized and transmitted to us.
4. Please provide the Token Number that was generated onto a response to this thread.

At the end of your reply, please add @ BillM223 (without the space in between) so that I will be notified.

[momekane]

@BillM223  Token # 796768

[BillM223]

Thank you for sending the token.

TurboTax was correct to calculate the underpayment penalty on form 502UP. This is why...

GENERAL INSTRUCTIONS Section 10-815 of the Tax-General Article of the Annotated Code of Maryland requires every individual, or individuals filing jointly, who receives taxable income which is not subject to Maryland withholding, or from which not enough Maryland tax is withheld to file a Declaration of Estimated Tax, if the income can be expected to develop a tax of more than $500 in excess of the Maryland withholding. Furthermore, Sections 13-602 and 13-702 stipulate that any individual so required to file, who either (1) fails to file on the date or dates prescribed; (2) fails to pay the installment or installments when due or (3) estimates a tax less than ninety (90) percent of the developed tax shown on the return for the current tax year and less than 110% of the tax that was developed for the prior year, shall be subject to penalty and interest. See 502UP Form and Instructions.

Note that if any of the three options in the second sentence is true, then “[you] shall be subject to penalty and interest.” As you know, you missed the payment due dates for the 2nd and 3rd quarter by a few days in each case.

On the same page in the Instructions, it goes on to say:

If your estimated tax payment was not timely, but was paid earlier than the due date of the next quarter, adjust the factor as follows:

…

2nd Period - For payments due by June 15, 2020 that were not paid by June 15, but paid earlier than September 15, count the number of months from the due date of June 15, that the payment was late. Treat a partial month as one month. Divide that number by twelve and multiply it by the 10.5% annual rate. Apply this adjusted factor to the underpaid amount on line 15. Note: The due dates for the first and second installment periods were extended to July 15, 2020 due to the catastrophic health emergency related to COVID-19. Use the adjusted interest factors on Line 16 of Form 502UP.

3rd Period – For payments due by September 15, 2020 that were not paid by September 15, 2020 but paid earlier than December 15, 2020, count the number of months from the due date of September 15, 2020 that the payment was late. Treat a partial month as one month. Divide that number by twelve and multiply it by the 10.5% annual rate. Apply this adjusted factor to the underpaid amount on line 15. For payments made on or later than December 15, 2020, apply the interest factor of .0595 to the underpaid amount on line 15. …

In summary, if you are required to make estimated payments (which you were because you didn’t have a lot of withholding), then you have to make the quarterly payments in a timely manner or be penalized for under paying each quarter. As you saw above, since you missed two payments by a few days, you were penalized the equivalent of a month for the second quarter and a month for the third quarter (“Treat a partial month as one month”).

Since options (1), (2), and (3) in the second sentence of the General Instructions are equal, if any one of them fails, then you are subject to penalty and interest. The fact that you paid more than 100% of your tax by the end of the year is not sufficient to overcome this.

Make sense?