Maryland Composite Return

MINIMUM REQUIRED INPUT:  An entry must be made in the "Composite processing options" field (Maryland - Composite - Composite Return Information) in order to produce a Form 505 composite return.

WHICH PARTNERS WILL BE INCLUDED:

The first option of the "Composite processing options" (see above) includes all nonresident individual partners in the composite return.

The second option includes only nonresident individual partners (in the composite return) if they were selected at Federal - Common State - Generic State Schedule K-1 Information - Generic Partner Input.

HOW TO SELECT PARTNERS IN THE GENERIC PARTNER INPUT SECTION:  You can select one or more nonresident individual partner for inclusion in the composite return (when the second option was selected) by entering each includable partner's "Partner Number" and also entering the word "in" (for include) in the "State code" field.    

EXCLUSION OF PARTNERS:  If the first "Composite processing option" was selected (see WHICH PARTNERS WILL BE INCLUDED), all nonresident individuals are included except that particular nonresident individual partners may be excluded in the "Generic Partner Input" section. To do this enter each excludable partner's "Partner Number" and also enter the word "out" in the "State code" field.

FILING STATUS OF PARTICIPATING PARTNERS: The program assumes that the filing status of each participating partner is "Single."  The filing status of each participating partner may otherwise be selected in the "Generic Partner Input" section at  Federal - Common State - Generic State Schedule K-1 Information.  To select a filing status enter a "Partner Number" there and make a selection in the "Filing status" field. The available filing statuses are:  Single, Married filing joint return or spouse had no income, Married filing separately, Head of household, Qualifying widow(er) with dependent child, and Dependent taxpayer.

Note: If the status of a partner is Married filing separately, you may enter the SSN of the spouse in the "State use" field there.

ALLOWABLE EXEMPTIONS:  The number of $1,000 exemptions for each partner is assumed to be zero.  Enter the number of $1,000 exemption for each partner (if not zero) in the "State use - field 5" of the "Generic Partner Input" section referred to above. The maximum number of $1,000 exemptions available to a partner is "4".

The assumed number of $3,200 exemptions for each partner depends on the filing status of that partner.

If the filing status is single then one $3,200 exemption is assumed.

If the filing status is married filing joint return or spouse had no income then two $3,200 exemptions are assumed.

If the filing status is married filing separately then one $3,200 exemption is assumed.

If the filing status is head of household then two $3,200 exemptions are assumed.

If the filing status is qualifying widow(er) with dependent child then two $3,200 exemptions are assumed.

If the filing status is dependent taxpayer then zero $3,200 exemptions are assumed (computed to be $0).

If the assumption is incorrect for a particular partner, enter the number of $3,200 exemptions for a particular partner in the "State use - field 4" located in the "Generic Partner Input" section at Federal - Common State - Generic State Schedule K-1 Information.

Per the Maryland Comptroller's instructions (Maryland Income Tax Administrative Release No. 6) the resulting exemption amount is then multiplied by a fraction (See Maryland - Composite - Ratio of nonresident partner income to total income) which consists of total nonresident partner income attributable to Maryland over the total distributive income of the partnership.

If you would prefer to enter the actual allowable exemption amount for any participating partner you may do so by checking the "State use - checkbox 1" and entering the actual exemption amount in the "State use - field 4".at Federal - Common State - Generic State Schedule K-1 Information - Generic Partner Input.

STANDARD DEDUCTIONS:  The amount of standard deduction for a given participating partner depends on the filing status of that partner.  Per the Maryland Comptroller's instructions (Maryland Income Tax Administrative Release No. 6) the amount of standard deduction for a nonresident individual partner participating in a composite return is the maximum standard deduction allowed a resident having the same filing status multiplied by the same fraction mentioned in the "Allowable Exemptions" section above.

The current maximum standard deduction is $2,000 for a resident taxpayer with a filing status of Single, Married filing separately, or Dependent taxpayer.

The current maximum standard deduction is $4,000 for a resident taxpayer with a filing status of Married filing jointly, Head of household, or Qualifying widow(er).

The program will compute the standard deduction for each partner multiplying the fraction mentioned above in the "Allowable Exemptions" section by the applicable maximum standard deduction discussed in the preceding two sentences.

If necessary, you may override the standard deduction for any partner by checking the "State use - checkbox 2" and entering the actual standard deduction amount in the "State use - field 5" at Federal - Common State - Generic State Schedule K-1 Information - Generic Partner Input.

TAX COMPUTATION:  A tax is computed for each partner in the "Participating Partners' Information" statement.  The statement begins with each participating partner's distributive income allocable to Maryland combined with that partner's share of any decoupling modification.  This combined amount is then reduced by the allowable exemption and standard deduction to arrive at taxable income.  The tax consists of two components.  The first part of the tax is derived by applying the graduated tax rates against each partners taxable income. (Currently the graduated tax rates = 2% of the first $1,000, 3% of the next $1,000, 4% of the next $1,000, 4.75% of the amount in excess of $3,000 but less than $150,000, 5% of the next $150,000, 5.25% of the next $200,000, 5.5% of the next $500,000, and 6.25% in the excess of $1,000,000).  The second part of the tax (special nonresident tax) is equal to the taxable income multiplied by 0.0125. These two amounts appear as a single combined amount in the statement and are totalled for all the participating partners and the total is carried to line 38 (Maryland tax after credits) of page 2 of Form 505.

All amounts appearing in the "Participating Partners' Information" statement can be overridden in the "Generic Partner Input" section (Federal - Common State - Generic State Schedule K-1 Information) on a partner by partner basis with the exception of "Taxable Income."  See "GENERIC PARTNER INPUT SECTION OVERRIDES" below for more information.      

TAXES PAID ON PARTNER'S BEHALF:  The taxes paid on partner's behalf amount which prints in the "Participating Partners' Information" statement is computed based on the three amounts of nonresident tax withheld which appear on the that partner's Maryland Schedule K-1 Equivalent produced with the Form 510.  This amount may be overridden on a partner by partner basis in the "State use - field 3" of the "Generic Partner Input" section (Federal - Common State - Generic State Schedule K-1 Information).

This amount is totalled for all participating partners in the above mentioned statement and the total is carried to line 46 (Nonresident tax paid by S corporations, or other unincorporated business entities) of page 2 of Form 505.  

GENERIC PARTNER INPUT SECTION OVERRIDES:  The following composite return overrides are available in the "Generic Partner Input" section located at Federal - Common State - Generic State Schedule K-1 Information. Each override entry applies only to the partner whose partner number appears in the associated "Partner Number" field in the  "State/City Information" section.

Filing status -  Assumed to be single unless otherwise entered in the "Filing status" field.

Distributive income allocable to Maryland plus decoupling modification -  Carries from the Form 510 Sch K-1 Equivalent unless overridden in the "State use - field 1."

Allowable exemption -  Computed defaults are explained above in the allowable exemptions section. If the "State use - checkbox 1" is blank, then the entry in the "State use - field 4" equals the number of $3,200 exemptions involved.  If the "State use - checkbox 1" has been checked, then the "State use - field 4" amount equals the allowable exemption for that partner.

Standard deduction -  Computed as explained above in the standard deductions section.  If both "State use - field 5" and "State use - checkbox 2" are entered, the amount entered in "State use - field 5" will override the standard deduction for that partner. (If "State use - checkbox 2" is blank the amount entered in "State use - field 5" may affect the computation of exemptions (see allowable exemptions section above), but will not have any effect on the standard deduction amount.

Maryland tax plus special nonresident tax -  Computed as explained above in the tax computation section unless overridden in "State use - field 2."   

Taxes paid on partner's behalf -  Computed as explained above in the taxes paid on partner's behalf section.  May be overridden in "State use - field 3."