What is the calculation of Maryland Form 511, line 2 in an 1120S 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® ProSystem fx® Tax
CCH Axcess™ Tax
1120S
S Corporation
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 1120S, Schedule K, lines 1-10, plus taxes based on net income included on 1120S, page 1, line 12. Currently, the MD tax Federal deduction addback is calculated when it is derived from the tax payment input on Federal > Payments/Penalties/Estimates > Payments worksheet > Section 2 - State Quarterly Payments > Detail > Line 1 - State Code, selected as MD, and Grid 1 - Payment - Based on Income.
  1. Go to Federal General > Return Options worksheet.
  2. Expand Section 1 - Processing Options.
  3. In Line 73 - Suppress - Carrying of detailed state/city tax payments, select No to allow the Payments/Penalties worksheet input to carry back to Federal return as a deduction.
  4. Expand Section 2 - Calculation Options.
  5. In Line 3 - 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
  6. Go to Federal Income / Deductions > Business worksheet.
  7. Expand Section 9 - Taxes and Licenses.
  8. In Grid 1 - State and City Taxes - Adds to Accrued Taxes, remove inputs for state code MD.
Notes
  • For Cash Basis taxpayers:
    • If the 1120S, page 1, line 12 taxes paid to MD deduction is different than the taxes paid including accrued taxes input on Federal > Payments/Penalties/Estimates > Payments worksheet > Section 2, then an input may be needed on Federal Sch L/M > Book Amounts (Schedule M-1 / M-3) worksheet > Line 5 - State taxes, to balance the Federal Schedule L.
    • If not choosing to use Federal General > Return Options worksheet > Section 2 - Calculation Options > Line 3, then the documented work around on release 2020-4.1/2020.04010 is to pink override MD 511, line 4, and MD K-1s with the correct amounts.
  • On release 2020-4.1/2020.04010, Federal Income / Deductions > Business worksheet > Section 9 - Taxes and Licenses > Grid 1 - State and City Taxes - Adds to Accrued 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 22nd, 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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