What is the calculation of Maryland Form 511, line 2 in an 1065 return using CCH Axcess™ Tax and CCH® ProSystem fx® Tax worksheet view?

  • Article Type:
  • QA
  • Last Modified:
  • 08/11/2021

Question

Maryland Electing Pass-Through Entity Deduction

Environment

CCH Axcess™ Tax
CCH® ProSystem fx® Tax
1065
Partnership
Maryland
MD
Worksheet View
WSV
Form 511
 

Answer

Beginning on release 2020.040110 (Axcess 2020-4.11) available August 13, 2021:

State and local taxes based on income (trade/business, rental farm, etc.) will now be included in the calculation of Form 511, line 2.  An override for this calculation is available on Maryland > Income / Deductions > Other Adjustments and Overrides > State or local tax addback - override.

Prior to this release:

MD electing PTE instructions, page 5 and 6 discuss how Form 511, line 2 should be derived, specific to Federal 1065 Schedule K, lines 1-11, plus taxes based on income included in 1065 page 1, line 14. Currently, the MD tax Federal deduction addback is calculated when it is derived from the tax payment input on Maryland > Payments/Penalties worksheet  > Section 1 - Payments. and Federal State/City Tax Accrual is selected to carry to Federal 1065 page 1 and adjust either the balance sheet or Schedule M-1.
  1. Go to Federal General > Return Options worksheet.
  2. Expand Section 2 - Calculation Options.
  3. In Line 2 - State and City Tax Accrual option, select from the following:
    • Tax to page 1, adjust balance sheet
    • Tax to page 1, adjust Schedule M-1
  4. Go to Federal Income / Deductions > Business worksheet.
  5. Expand Section 10 - Taxes and Licenses.
  6. In Grid 1 - State and City Taxes - Adds to Accrued Taxes, remove inputs for state code MD.
Notes
  • For Cash Basis taxpayers:
    • If the Federal 1065, page 1, line 14, MD taxes paid deduction is different than the taxes paid including accrued taxes input on Maryland > Payments/Penalties worksheet  > Section 1 - Payments, then an input may be needed on Federal L/M-1/M-2/M-3 > Book Amounts (Schedule M-1/M-3) worksheet > Line 4 - State and city taxes, to balance the Federal Schedule L.
    • If not choosing to use Federal General > Return Options worksheet > Section 2 - Calculation Options > Line 2, the documented work around on release 2020-4.1/2020.04010
      • Go to Government MD Form 511, line 2, utilize form (pink) override with the correct amount.
      • Go to Maryland > Income / Deductions worksheet > Section 3 - Other Adjustments and Overrides > Lines 5 - Total distributive income per federal return, and Line 7 - Maryland distributive Income, input the correct amounts for the Maryland K-1s, lines A1 and A2.
  • On release 2020-4.1/2020.04010, Federal Income / Deductions > Business worksheet > Section 10 - Taxes and Licenses > Grid 1 - State and City Taxes DO NOT get added back to 511, line 2.
    • The Calculation of MD 511, line 2 does not currently consider this Fed deduction input that is not first used for reducing taxes due on the Form 511, line 12. 
    • This input is expected to be included in the calculation of Form 511, line 2 on release 2020-4.2/2020.04020, available August 22, 2021.
  • Preparers have often asked support about the system calculating a MD K-1, line B5 Addition. 
    • When the addback is calculated as included on MD 511, line 2, and Sch. K-1, Part A, line 1 then it is not included as addition on line B5.

Additional Information

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