New Maryland Form 511 – Pass-Through Entity Election Income Tax Return was released on Tuesday, June 29th. Tax preparers have been awaiting the release of this form, necessary due to Maryland legislation that was recently enacted allowing pass-through entities (partnerships and S-corporations) to elect to pay Maryland tax at the entity level and then claim the state tax deduction at the entity level. A few states have enacted similar entity level taxes in response to the federal $10,000 cap on itemized deductions for state and local taxes (“SALT”) for individual income tax purposes.
After releasing the form, the Comptroller of Maryland further extended the filing and payment deadlines for pass-through entity income tax returns from July 15, 2021 to September 15, 2021. Pass-through entities that file their 2020 income tax returns and pay any outstanding liabilities by September 15th will not be charged any late payment/filing interest or penalty.
The extension and waiver do not apply to interest or penalty charged on 2021 underpayment of estimated tax. However, pass-through entities that want to request a waiver of interest or penalty charged on underpayment of estimated tax, or late payment penalty and interest charged for returns filed after September 15th may submit their requests to PTEREQUEST @ marylandtaxes.gov.
Requests for an extension of time to file pass-through entity income tax returns beyond September 15th may be made using Form 510E. The extended filing due date would be November 15th for S corporations and October 15th for all other pass-through entities. However, the tax payment due date would remain September 15th.
Individual members of a pass-through entity whose returns cannot be filed until the pass-through entity files its return and issues the Schedules K-1 to members, may also request a waiver of interest or penalty by e-mailing their requests to PTEREQUEST @ marylandtaxes.gov.
While the implementation of the MD pass-through entity tax has been challenging to navigate, it brings significant benefits to MD businesses and their owners. Snyder Cohn can help you determine if there is a benefit from making this election to pay tax at the pass-through entity level. Contact us with any questions you have regarding your pass-through entity tax filings, including the new Form 511, the extended filing and payment deadline, and eligibility for the waiver of penalty and interest.
By Lorraine Sexton