Maryland General Information

The Maryland filing status is the same as federal, and therefore the use of TSJ coding is necessary for Maryland purposes only if the joint return will be split. TSJ coding is not required for the preparation of the Maryland income tax return.

State Taxable Income Basis

Residents. Maryland carries all items of federal income and deductions to the appropriate line of the Maryland return. Certain additions and subtractions are applied to federal AGI to arrive at Maryland AGI.

The standard or itemized deduction and exemption allowance are subtracted to arrive at Maryland taxable income.

Part-Year Residents. Part-year residents calculate the Maryland return the same as residents except a subtraction is allowed for the income received during the period of nonresidence to arrive at Maryland adjusted gross income. “FS” and “State” codes on federal worksheets are used to identify income received during the period of nonresidence.

Nonresidents. Nonresidents must complete Maryland Form 505 and 505NR, identifying items of income and deductions from the federal return as Maryland source or non-Maryland source. Maryland uses “FS” and “State” codes on federal worksheets to identify income applicable to Maryland. Deductions applicable to Maryland are prorated based on Maryland versus non-Maryland income.

Part-Year Resident and Nonresident Returns

To prepare a Maryland part-year return, enter a “P” on Maryland > General > Residency Information > Residency code, and the dates of residency in the Date residency or temporary residency began/ended fields. To prepare a Maryland nonresident return, enter an “N” on Maryland > General > Residency Information > Residency code. Enter dates in the Date residency or temporary residency began/ended fields only if the taxpayer had temporary residency in Maryland but was a legal resident of another state.

Filing Status Optimization

Two separate tax return files can be produced from one original set of worksheet entries. The basis for segregating the return information is the existing TS or TSJ code fields, the FSO fields, and any other taxpayer/spouse designations on the federal, state or city interview forms.

Processing options related to the Filing Status Optimization are available on General > Return Options > Filing Status Comparison and Filing Status Optimization. This feature is only available to in-office users, and can be requested using the menu selection "Options"/"Split Joint Return" on joint returns only. Once the option is selected, two additional separate returns will be created that must then be accessed individually for further processing such as additional entries, corrections, calculations, review and printing.

The Filing Status Comparison, which can be requested on General > Return Options > Filing Status Comparison and Filing Status Optimization, can be used in advance to approximate the tax effect of filing separate returns, and accordingly can be used as a basis for deciding which joint returns to split.

Tax Exempt Interest

Enter tax exempt interest, such as municipal bond interest, received from Maryland or its political subdivisions, in the State Nontaxable fields on Income/Deductions > Interest > Detail > Tax Exempt Interest. Amounts entered in these State Nontaxable fields are excluded from the Maryland return.

Enter tax exempt interest that is taxable to Maryland in the State Taxable fields on Income/Deductions > Interest > Detail > Tax Exempt Interest.

If tax exempt interest reported on 1099-DIV includes both amounts from Maryland and amounts from other states, enter the Dividend Income - Source once, the amount from Maryland in the State Nontaxable field, and the remaining amount in the State Taxable field.

Enter tax exempt interest received from a passthrough entity in the "Interest and Dividends" section of the Passthrough worksheets. For tax exempt interest received from Maryland or its political subdivisions, use types "9" or "16." Amounts entered in conjunction with types "9" or "16" are excluded from the Maryland return. For tax exempt interest taxable to Maryland, use types "10" or "17."

Military Retirement Income Deduction

When entering pension information on Income/Deductions > IRAs, Pensions and Annuities, if a "4" is entered in the State Use Code field, the amount of pension entered that is federally taxable will be used to compute the Maryland military retirement deduction in accordance with the worksheet in the Maryland instructions. Additionally, the entry may also be qualified for the regular pension exclusion if the age or disability requirements are met.

Tier II Railroad Retirement Benefits

When entering pension information on Income/Deductions > IRAs, Pensions and Annuities, enter a "5" in the "State Use Code" field if the pension is a Tier II Railroad Retirement Benefit. This entry will include the federally taxable Tier II Railroad Retirement Benefits in the "Subtractions From Income" section of Form 502.

Form 502UP - Underpayment of Maryland Estimated Tax

Form 502UP is prepared when an interest/penalty for underpayment of estimated tax is calculated. Payment and exception information entered on Maryland > Estimates/ Underpayments > Underpayment Penalty Preparation is required to modify the penalty calculation. Codes are provided to either suppress or force the preparation of Form 502UP.

Form 502TP - Computation of Tax Preference Income

Form 502TP is prepared when the total Maryland tax preference income exceeds the exclusion amount ($20,000 for joint returns, $10,000 for all others). Nonresidents must make entries on Maryland > Income / Deductions > Tax Preference Income - Overrides (502TP). To force the preparation of the 502TP when it is not required, Select Maryland > Income / Deductions > Tax Preference Income - Overrides (502TP) > Force printing of Form 502TP (tax preference).

Form 502V - Use of Vehicle for Charitable Purposes

Form 502V is prepared when the appropriate entries are made on Maryland > Income / Deductions > Subtractions. The result is reported as an "Other subtraction" on Form 502 or Form 505.

Form 502E - Application for Extension of Time to File

An entry in the field, "State Extension(resident state automatic extension of time to file)" on General > Return Options > Form Printing Options will override entries on federal General > Extensions > Automatic Extension (Form 4868) for the resident state only.

Form 502E is prepared from entries on federal General > Extensions > Automatic Extension (Form 4868). It is assumed that the federal extension has also been requested. If the federal extension has not been requested, enter a "1" on federal General > Extensions > Automatic Extension (Form 4868) > "State use 1".

Maryland Deviations

The following differences between the Maryland resident income tax return and the federal income tax return are handled without additional entries. Do not make entries to include or exclude these deviations from the Maryland income tax return.

Depreciation

The federal bonus depreciation for qualifying assets placed in service after September 10, 2001 is calculated automatically in accordance with the Job Creation and Worker Assistance Act/Jobs and Growth Tax Relief Reconciliation Act of 2004, as well as the corresponding adjustment for the state disallowed portion of the bonus depreciation. Specific assets may be excluded from the bonus calculation entirely by making an entry on Depreciation and Amortization > General. Maryland allows all other federal depreciation. The use of state depreciation fields on the worksheet is not required and may cause the return to be incorrect. If you would like to override the calculated number, use Maryland > Income/Deductions > Decoupling Modification > Depreciation Deduction. The adjustment carries to the Maryland 500DM.

Federal exemption information carries to the Maryland return. Other exemptions allowed by Maryland are computed from entries on General > Basic Data. The additional exemption for a dependent age 65 or over is computed from the date of birth entered on General > Basic Data.

Other Maryland adjustments that are calculated from federal entries and do not require additional entries on Maryland interview forms are:

General Questions

A. The Revenue Administration Division of the State of Maryland requested that we print in upper case to help eliminate scanning problems.

A. The Revenue Administration Division of the State of Maryland requires computer generated returns to print amounts with no commas, no decimal points, no pennies, and no parentheses. This eliminates common scanning problems.

A. Maryland local income tax no longer has a maximum limit of 50% when taxable income exceeds $100,000 (single) or $150,000 (other).

Q. Where is the nonresident tax paid by S Corporations, Partnerships, and other passthrough entities entered?

A. Income and Deductions > Nonresident and Part-year Information > Nonresident Tax Paid by S Corporations, Partnerships or Maryland Limited Liability Companies.

Individual taxpayers can check the status of their refund by visiting www.marylandtaxes.gov and clicking on “Where’s my refund?” or by calling the automated refund inquiry hotline, toll‐free 1‐800‐218‐8160 or 410‐260‐7701. Advise taxpayers to wait at least 10 days from acceptance of their return before calling Taxpayer Services Division at toll‐free 1‐800‐638‐2937 or 410‐260‐7980.

Many state revenue agencies, including Maryland, are requesting additional information in an effort to combat stolen-identity tax fraud and to protect you and your tax refund. If you and your spouse have a driver's license or state issued identification card,

Please provide the requested information from it. The return will not be rejected if you do not provide a driver's license or state-issued identification. If you provide this information, it may help to identify you as the taxpayer.