MD nonresident with MD K-1

[Ayhn]

Hi professionals,

I have a question about a client who lived in VA all year and received multiple K-1s including a MD 1065 K-1 with net MD income (federal net loss plus MD additions).

Please confirm:

- I need to use form MD 505 to report nonresident income.

- On MD 505 page 2, the (1) Federal column should show federal income (all K-1s), (2) MD column should show federal loss of this K-1, (3) Non-MD column should show all other K-1s aggregate income, and on line 19 of MD 505, it should show the MD addition amount. 

Thank you!

[Intuit_Kallana · Accepted solution]

Based upon what you have entered here, yes you are correct.  On the K-1 screen, make sure that the Maryland entries are entered in the State Source Column with MD selected to insure they flow to the Maryland return and not the resident state.

[sjrcpa]

"insure they flow to the Maryland return and not the resident state."

Almost always this income should also flow to the Resident State.

[workhard2022]

Hello,

I came across a similar individual tax situation as the one posted above. The taxpayer is a Virginia (VA) resident and received a Schedule K-1 (Form 510/511) from Maryland (MD), which is the only source of MD income reported.

Here are the key details from the MD K-1:

• Letter A - Line 1 and Line 2, Member Income: -$30,000 (negative, same as federal K-1, Box1 number)

• Letter B / Line 3 - Net Decoupling Modification: $35,000 (positive)

I’ve followed the helpful guidance shared earlier, but I’d appreciate some clarification on the following points:

1. Should the Maryland return (Form 505) reflect a tax due based on the K-1 information?

2. On the Virginia return (Form 760CG), should a credit be claimed for taxes paid to Maryland?

Thanks so much for your continued guidance and support! Wishing everyone a great week ahead.

[sjrcpa]

Yes to both questions.

[workhard2022]

great, thank you for answering my questions!

[workhard2022]

Thank you for the reminder. On the pro-connect input tab you mentioned, I see two separate columns: one titled "State" and another titled "Source." When you refer to the "state source column," I assume you’re referring only to the "State" column. There’s no need to select anything in the "Source" (N/S) column—correct?

[Ayhn]

Thank you! That's very helpful!

[Ayhn]

Thanks for the clarification! Your help is much appreciated!

[Ayhn]

A follow up question... In my case, the federal K-1 is at loss, and MD K-1 had a big addition, so that MD state had an income. In other words, MD income was all from MD addition. It seems VA doesn't tax on the MD addition, right? But my VA tax return still has a tax credit for MD taxes paid, does it make sense?