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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 3017
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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How do I report a DC S-corp schedule K-1 income in a Maryland

Customer Question

How do I report a DC S-corp schedule K-1 income in a Maryland resident tax returns. Does the Maryland resident need to file a DC income tax return and report the DC s-corp income (schedule K-1) on a DC return? or just report in his Maryland tax return? Also, can a Maryland resident that work in DC that had a small state income tax remitted to DC but had all full income and state tax reported and remitted to Maryland claim the remitted portion on his Maryland tax. Example:
Fed Income: 80,000
MD State: 80,000
MD State withholding: 7,500
DC reported income: 8,500
DC tax taken: 500
(Observe that combined state income exceeded Federal reported income!)
Can I combine both MD and DC withholding and report on MD tax? That is, report State withheld tax as $8,000? I understand both jurisdiction has some kind of reciprocity.
Thanks
Mark
Submitted: 1 year ago.
Category: Tax
Expert:  Barbara replied 1 year ago.
Welcome to Just Answer. My name is ***** ***** it will be my pleasure to assist you with your tax question today.
The information from the DC S corporation K-1 is entered on your FEDERAL tax return. Since the Maryland resident state tax return starts with your federal adjusted gross income, the DC S corporation K-1 information should already be included.
You are correct that DC and Maryland are reciprocal states.
You would complete your federal tax return first with all information (DC and Maryland), your non-resident state tax return next (DC) and your resident state tax return last so that everything is calculated properly.
Please let me know if you require further information or clarification.
Thank you and best regards,
Barb
Customer: replied 1 year ago.

Please you did not answer my question.

So the S-corp Schedule K-1 income will be reported on a DC tax return as a non-resident and excluded on the MD tax return? Note that both jurisdictions have a reciprocity agreement. How about the W-2 example.

I don't understand the concept of preparing DC tax first and MD tax second. I use ATX tax software and it automatically prepares the State taxes.

Expert:  Barbara replied 1 year ago.
The information from the K-1 is reported on your federal return, DC non-resident return and MD resident return. The protocol to prepare your returns is as listed in my initial answer, i.e., federal first, non-resident, then resident. This provides that the calculations will be done accurately. I am aware of the reciprocity agreement. You enter W-2 information exactly as it appears on the form. I am not familiar with ATX software.