Pass-Through Entity Tax Returns FAQs


  1. How do I indicate that I am filing for a PTE?
  2. What event marks the “first filing” for a PTE that wants to elect for tax year 2024?
  3. What is the challenge the Office of the Comptroller has with PTE returns?
  4. What is the Office doing to ensure accurate and timely processing?
  5. What can I do to ensure timely processing?
  6. When will this situation be resolved for good?

Pass-Through Entity Tax Returns Answers

  1. How do I indicate that I am filing for an electing PTE?

    Pass-through entities (PTEs) must make the election under Tax-General Article § 10-102.1(b)(2)(ii). A PTE must make the election to (1) pay at the entity level on all members’ shares of income or (2) pay the mandatory tax on behalf of nonresident members only with the first filing or payment for the tax year. The election or nonelection made with the first payment or filing is irrevocable for the tax year in which it is made.

  2. What event marks the “first filing” for a PTE that wants to elect for tax year 2024?

    The first filing is not limited to the Form 510/511D; it could also be the Form 510/511E.

    If you make estimated payments, you make the irrevocable election/nonelection on the first Form 510/511D you submit with a payment. Please note, if you file a Form 510/511D without a payment, we do not process it and it is not a valid election. Likewise, if you submit an estimated payment with no form, it is a nonelection. If you do not need to make estimated payments, you do not have to submit a Form 510/511D just to make the election. You may, however, submit a Form 510/511D with a small payment, and, if the election box A is checked, it is a valid election.

    If you do not make estimated payments, but you do file a request for extension on Form Form 510/511E, you make the irrevocable election on Form 510/511E.

    If you do not make estimated payments or file a request for extension, you make the election by filing Form 511 as the year-end return. Conversley, you “nonelect” by filing the Form 510.

    An overpayment from a prior year that is applied to estimated payments for the following year is NOT an election or nonelection. The rules described above apply even when an overpayment from the previous tax year has been applied to the current tax year.

    More information can be found in the Tax Alert.

  3. What is the challenge the Office of the Comptroller has with PTE returns?

    The complexity of many of these returns, coupled with our lack of staff and outdated technology, has made it difficult for the agency to deal with the rapidly increasing number of PTE returns filed.

    Due to the substantial size of most of these refundable credits, our agency must validate each return. Validation includes verifying the PTE has indeed paid the estimated payments and that the individual member has claimed the proper amount. Additionally, substantiating documentation must accompany the returns as well. More validations must also be completed with complex PTE organizational structures.

    Our current tax processing application is antiquated and cannot automatically handle these validations. While we are in the middle of a multi-year tax processing system replacement project, the personal income tax and PTE components will not be live in the next two years. The lack of automation and large value of the credits therefore necessitates manual validation reviews.

  4. What is the Office doing to ensure accurate and timely processing?

    First, we were able to secure several additional PINS in the FY24 budget and have hired several more staff in our Revenue Administration Division to help. Second, after that team was on board, we changed our process to simplify the process. We have built a report that automatically validates the credit amounts. While a manual touchpoint is still necessary, a validation by this report allows the intervention to occur rapidly. This validation report works on more than 90% of claimed PTE credits if we have all the correct data submitted electronically. With this process improvement, we are voluntarily validating all PTE related credits for tax years 2021 and later.

  5. What can I do to ensure timely processing?

    The more you can follow the below steps when submitting these types of returns, the more likely there will be a faster and more accurate process for you and your clients:

    1. File the personal income tax return electronically;
    2. File the PTE tax return electronically;
    3. Pay all estimated payments electronically, both PTE and individual. There are 3 options
      1. Filing electronically using an approved software vendor: If filing using an approved software vendor, do not mail 510/511D; retain it with company’s records. Visit https://marylandtaxes.gov/pros/approved-vendors.php for a list of approved vendors.
      2. Filing electronically using Comptroller of Maryland’s secure PTE Estimated Payments Online application. There, you will have the ability to make one single estimated payments or schedule some or all your payments at one time via direct debit. These scheduled payments will be deducted from your bank account on the dates that you specify. Login to PTE Estimated Payments Portal https://interactive2.marylandtaxes.gov/PTECorpPayment
      3. To pay by credit card, visit https://marylandtaxes.gov/business/tax-assistance/credit-card.php
    4. Double-check that PTE payments to be claimed by individuals match what the PTE has disclosed;
    5. When preparing the PTE return, have the PTE confirm they have made the tax payments they are reporting to you;
    6. Ensure that the electing PTE credit amount claimed on the individual return is also added back as an addition to income on the individual return;
    7. If using tax preparation software that provides the option to create an electronic version of the Schedule K-1 from the PTE, please use that function and attach the electronic K-1, which is easier for our technology to process.
    8. Please only submit the K-1 as a PDF attachment if the option for an electronic version of the Schedule K-1 is not available. (We plan to work with the software companies to encourage them to offer the electronic K-1 functionality.)

  6. When will this situation be resolved for good?

    Once our individual and PTE tax returns are processed in our new Maryland Tax Connect system (or Revenue Premier, which is the branded name of the system we are moving into), these issues should largely disappear. Our goal is to migrate all individual income taxes and PTE tax returns to that system in late 2025.

Note: Please email TACORPORATE@Marylandtaxes.gov for PTE issues.