Md. Code Regs. 03.04.07.03

Current through Register Vol. 51, No. 22, November 1, 2024

Section 03.04.07.03 - Filing of Returns and Payment of Tax

A. Requirement to File Returns.

(1) Information Return. A pass-through entity doing business in this State and paying tax on behalf of nonresident members under Tax-General Article, § 10-102.1(b)(2)(i), Annotated Code of Maryland, shall file an information return using Form 510. A pass through entity paying tax on behalf of nonresident members under Tax-General Article, § 10-102.1(b)(2)(i), Annotated Code of Maryland, that is an S corporation may be required to file a corporate income tax return as provided in COMAR 03.04.03.03B(3).

(2) Income Tax Return. A pass-through entity doing business in this State and electing to be taxed on all members' distributive or pro rata shares under Tax-General Article, § 10-102.1(b)(2)(ii), Annotated Code of Maryland, shall file an income tax return using Form 511. An S corporation that pays the tax on all members' shares of income under Tax-General Article, § 10-102.1(b)(2)(ii), Annotated Code of Maryland, may be required to file a corporate income tax return as provided in COMAR 03.04.03.03B(3).

(3) Attachments.

(a) A pass-through entity that is a partnership (including a limited liability company taxed as a partnership and a business trust taxed as a partnership) shall file with the information return a copy of:

(i) Schedule K of Federal Form 1065; and

(ii) A Schedule K-1 for each nonresident member.

(b) A pass-through entity that is an S corporation shall file with the information return a copy of:

(i) Schedule K of Federal Form 1120S; and

(ii) A Schedule K-1 for each nonresident member.

(4) Due Date. Except as provided in §A(5) of this regulation, the due date for filing a return is:

(a) For a pass-through entity that is a partnership (including a limited liability company taxed as a partnership and a business trust taxed as a partnership), the 15th day of the 4th month following the close of the partnership's taxable year; and

(b) For a pass-through entity that is an S corporation, the 15th day of the 4th month following the close of the taxable year.

(5) Extension of Time to File.

(a) A pass-through entity that is a partnership (including a limited liability company taxed as a partnership and a business trust taxed as a partnership) shall be granted an automatic extension of up to 6 months by filing a Form 510E.

(b) A pass-through entity that is an S corporation shall be granted an automatic extension of up to 7 months by filing a Maryland Form 510E.

(c) Time for Filing. The due date for filing an extension is:

(i) For a pass-through entity that is a partnership (including a limited liability company taxed as a partnership and a business trust taxed as a partnership, the 15th day of the 4th month following the close of the partnership's taxable year; and

(ii) For a pass-through entity that is an S corporation, the 15th day of the 4th month following the close of the S corporation's taxable year.

B. Estimated Tax Returns.

(1) Requirement to File. A pass-through entity shall file quarterly estimated tax returns using Form 510D if the total tax imposed under Tax-General Article, §10-102.1(b), Annotated Code of Maryland, is reasonably expected to exceed $1,000 for the taxable year. At least 25 percent of the total estimated tax shall be remitted by each of the four installment dates set forth in §B(2) of this regulation.

(2) Due Date.

(a) A pass-through entity that is a partnership (including a limited liability company taxed as a partnership and a business trust taxed as a partnership) required to file estimated tax returns shall file the returns and pay the tax due on or before the 15th day of the 4th, 6th, and 9th month of the tax year and the 15th day of the 1st month of the succeeding year.

(b) A pass-through entity that is an S corporation required to file estimated tax returns shall file the returns and pay the tax due on or before the 15th day of the 4th, 6th, 9th, and 12th month of the tax year.

(3) Unpaid Tax.

(a) The Comptroller shall assess interest and penalties on the underpayment of estimated tax based on the unpaid tax from the due date of the tax to the date on which the tax is paid.

(b) The unpaid tax is the lesser of:

(i) 90 percent of the tax required to be shown on the return for the current taxable year; or

(ii) 110 percent of the tax paid for the prior taxable year.

(4) Short Tax Period. For a short tax period, the total estimated tax for the taxable period shall be paid equally over the number of installment due dates occurring during the short tax year. However, estimated tax is not required to be remitted for a short period of less than 4 months.

C. Annual Return.

(1) Requirement to File.

(a) A pass-through entity shall file an annual return whether or not a tax is due.

(b) The annual return shall reconcile the total estimated taxes paid with the total tax liability computed on the return.

(c) If estimated tax returns are not required, the annual return shall develop the tax due for the taxable year.

(2) Due Date. Except as provided in §C(3) of this regulation, the annual return, with payment of any tax due, shall be filed on or before the due date for the filing of the pass-through entity return as provided in §A(4) of this regulation.

(3) Extension of Time to File. An extension of time to file an annual return shall be allowed for the same period of time allowed under §A(5) of this regulation, if:

(a) An extension is requested for the information return; and

(b) The extension is requested within the time provided under §A(5)(c) of this regulation.

(4) Effect of Extension. An extension of time to file an annual return may not extend the time for payment of any tax due.

D. Credit for Tax Paid.

(1) Tax required to be paid by the pass-through entity under Tax-General Article, § 10-102.1(b)(2)(i), Annotated Code of Maryland, is paid on behalf of the nonresident members.

(2) Tax elected to be paid by the pass-through entity under Tax-General Article, § 10-102.1(b)(2)(ii), Annotated Code of Maryland, is a tax imposed on the entity itself.

(3) The tax attributable to a member's share of the taxable income that was paid by the pass-through entity shall be claimed by that member as a credit, allowed by Tax-General Article, § 10-701.1, Annotated Code of Maryland, on:

(a) The tax return of the member; or

(b) If the entity does not elect to be taxed on all members' distributive or pro rata shares of income, a composite return filed on behalf of the electing nonresident member by the pass-through entity paying the tax on behalf of nonresidents under Tax-General Article, § 10-102.1(b)(2)(i), Annotated Code of Maryland.

(4) For a pass-through entity that has a member that is a fiduciary, the credit allowed by Tax-General Article, § 10-701.1, Annotated Code of Maryland, may be claimed by the beneficiary of that fiduciary in an amount in proportion to the distribution of income by the fiduciary to that beneficiary.

(5) Overpayments of tax shown on the annual return of a pass-through entity that paid the tax on behalf of nonresidents under Tax-General Article, § 10-102.1(b)(2)(i), Annotated Code of Maryland, may not be:

(a) Refunded to the pass-through entity; or

(b) Applied to the current year estimated tax of the pass-through entity.

(6) Overpayments of tax shown on the annual return of a pass-through entity that elects to pay on all members' distributive or pro rata shares of income under Tax-General Article, § 10-102.1(b)(2)(ii), Annotated Code of Maryland, may be:

(a) Refunded to the pass-through entity; or

(b) Applied to the current year estimated tax of the pass-through entity.

E. Member That Is a Pass-Through Entity. A member of a pass-through entity that is itself a pass-through entity also shall file the form as provided under §A or C(1) of this regulation.

Md. Code Regs. 03.04.07.03

Regulation .03 amended effective November 20, 1994 (21:23 Md. R. 1931)
Regulation .03B amended and D adopted effective December 22, 2003 (30:25 Md. R. 1845); amended effective 44:6 Md. R. 324, eff. 3/27/2017; amended effective 49:9 Md. R. 529, eff. 5/2/2022