Amended Maryland Tax Return for Wynne Decision – What and When to File

Posting by Sean Urbany

As mentioned in our previous post, the Supreme Court recently ruled that Maryland’s tax law for income earned outside of the state is unconstitutional. Each year, Maryland residents pay a Maryland state income tax and a local income tax based on the county in which they reside. Prior to this decision, Maryland residents who earned income from states outside of Maryland were only allowed to claim a tax credit against the Maryland state tax. With the Supreme Court ruling, Maryland residents who pay taxes to other states for income earned from outside of Maryland will now be able to claim a tax credit against not only their Maryland state tax, but also the local county tax.

Should I file an amended return?
If you are a Maryland resident who has been paying taxes to states outside of Maryland, the first step to determining if you should file an amended return is to review the your previously filed returns and see if the tax credit was limited. This can be determined by looking at the Form 502CR filed for each state and comparing the allowed credit (Line 8) versus the total taxes paid to the other state (Line 7). If the allowed credit is equal to the taxes paid, your credit was not previously limited and no amended return needs to be filed. However, if the allowed credit is less than the actual taxes paid to the other state, then you may want to file an amended return as the credit will increase.

What forms do I file with the amended return?
When filing your amended return, you should include the following forms for each year an amended return is being filed:

  1. Form 502X – Amended Tax Return
  2. Form 502CR for each state in which a credit is being claimed (these will be the same forms filed with your original tax return)
  3. Form 502LC – This is the new form recently created by Maryland to calculate the new local tax credit. A separate 502LC should be filed for each state in which a credit is being claimed, similar to the 502CR. If you are filing Form 502LC for multiple states, you will also need to include a summary Form 502LC totaling the state tax credits and the local tax credits from the separate 502LCs.

What years can I filed an amended return for?
An amended return must be filed within three (3) years from the time a return was filed. This means that you may be able to file an amended return as far back as the 2011 tax year, but only if you filed an extension for that year and filed the return in the fall of 2012. However, if your 2011 return was filed by the April 15th due date, the earliest tax year in which you may file an amended return is the 2012 tax year.

I haven’t filed a 2014 tax return yet. What should I do?
If you have not yet filed your 2014 Maryland tax return, all that you need to do is calculate the allowable tax credit using the new Form 502LC and attach the completed Form 502LC(s) to your return.

For more information regarding the Wynne decision, you can visit the State of Maryland’s Frequently Asked Questions page here.

If you have any additional questions on this decision and its impact on your Maryland returns, please consult your tax advisor.

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