The Maryland 500Dm form is used to report modifications for Maryland tax purposes when certain federal provisions affect a taxpayer's return. This form helps determine adjustments related to depreciation deductions, net operating loss carryovers, and other related changes that may impact taxable income. Completing this form accurately is essential for ensuring compliance with Maryland tax regulations.
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The Maryland 500Dm form is an essential document for taxpayers whose Maryland income tax returns are influenced by specific federal tax provisions. It is particularly relevant for those who have utilized benefits from the Special Depreciation Allowance, the special five-year net operating loss (NOL) carryback provision, or the increased Section 179 depreciation deduction as outlined in the federal Job Creation and Worker Assistance Act of 2002 and the Jobs and Growth Tax Relief Reconciliation Act of 2003. This form serves to calculate the necessary modifications to ensure that Maryland's tax regulations align with these federal changes, effectively decoupling state tax obligations from certain federal benefits. Taxpayers must complete a worksheet that includes various columns to compare their federal return as filed with a version that excludes the aforementioned federal provisions. The results help determine the net decoupling modification, which must then be reported on the Maryland return. Understanding the intricacies of the 500Dm form is crucial, as it not only affects depreciation and NOL deductions but also influences other related items that impact overall taxable income in Maryland.
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Maryland
DECOUPLING
YEAR
OR FISCAL YEAR
FORM
_ (ENDING __________, ______)
BEGINNING _______, ______
500DM
MODIFICATION
Name of taxpayer(s)
Taxpayer identification number
Use this form only if the Maryland return is affected by the use (for any tax year) of any of the following federal provisions:
•Special Depreciation Allowance under the federal Job Creation and Worker Assistance Act of 2002 (JCWAA) as increased and extended under the federal Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA);
•Carryover of a net operating loss (NOL) based on the special 5-year carryback provision under the JCWAA; or
•Federal Section 179 depreciation deduction, taken for a tax year beginning in calendar year 2003, that was increased as a result of JGTRRA provisions.
Complete the worksheet below.
Column 1
Column 2
Column 3
Federal Return
Federal Return without
Difference
as Filed
JCWAA and JGTRRA
Increase/
Provisions
Decrease (-)
1. Depreciation Deductions .................................................
Subtract the amount in Column 2 from the amount in Column 1
and enter in Column 3. If less than 0, enter as a negative amount (-).
2.NOL Deductions ...............................................................
3.Decoupling Modification from a Pass-through Entity .......................................................................................
If the modification is a subtraction, enter as a negative amount (-).
4.Other Related Changes (See instructions)
If the net change increases taxable income, enter as a positive amount. If the net change decreases taxable income,
enter as a negative amount (-). .....................................................................................................................................................
5.Net Decoupling Modification ...............................................................................................................................
Net the amounts on lines 1 through 4 of Column 3. This is the Decoupling Modification. Enter here and include (as a positive number) in the appropriate line of the Maryland return being filed. Also enter the applicable letter code(s) in the boxes provided on the return. See table below. (When determining which code to use, disregard any amounts on line 4.)
If line 5 is
Use the following code
Return
if there is an amount on:
positive enter
negative enter
Filed
Line 1
Line 2
Both lines 1 and 2
on the line for:
only
and/or line 3
500
Other Additions
e
f
dm
Other Subtractions
j
k
502
l
m
bb
cc
504
No code required
505
p
q
500X
Total Addition
Total Subtraction
Modifications
502X
Additions
Subtractions from
To Income
Income
COM/RAD-24 09/03
INSTRUCTIONS FOR
PAGE 2
MARYLAND FORM 500DM
DECOUPLING MODIFICATION
General Instructions
Purpose of Form
Maryland has decoupled from certain federal provisions, as listed at the top of Form 500DM, by enacting addition and subtraction modifications which eliminate the effect of the changes on Maryland and local taxes. This form is used to determine the amount of the required modification.
Use of Pro Forma Returns
Separate (pro forma) federal and Maryland returns must be prepared for use in completing Form 500DM. In addition to calculating depreciation and NOL deductions without the benefits afforded under the Job Creation and Worker Assistance Act of 2002 (JCWAA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), pro forma returns will also help to determine other related items that affect Maryland and local income tax liability (e.g., income items, addition and subtraction modifications, deductions and credits).
Additional Information
For more information regarding these modifications, see Administrative Release 38 which is available on our website at www.marylandtaxes.com or from any office of the Comptroller.
Specific Instructions
Column 1 – Federal Return as Filed
Column 1 (lines 1 and 2) is used for the amounts reported on the federal return which include the impacts of the Special Depreciation Allowance, the special 5-year NOL carryback period and the expanded section 179 expensing provisions.
Column 2 – Federal Return Without JCWAA and JGTRRA Provisions
Examples of items affected by decoupling are:
¥Gain or loss on sale of property
¥Recapture of depreciation
¥Passive loss
¥Maryland itemized deductions
Line 5 – Total
Net the amounts from lines 1 through 4 and enter on line 5. If line 5 is positive, include this amount in the appropriate line of the Maryland tax return being filed. Also enter the appropriate code letter(s) in the box(es) provided for the type of addition modification (either depreciation or NOL, or both).
If line 5 is negative, include this amount as a positive number in the appropriate line of the Maryland tax return being filed. Enter the appropriate code letter(s) in the box(es) provided for the type of subtraction modification (either depreciation or NOL, or both).
See the table at the bottom of Form 500DM for the line numbers and code letters to use.
Credits
For Maryland income tax credits affected by electing JCWAA and/or JGTRRA treatment, enter on the return to be filed, credits as calculated on the Maryland pro forma return without JCWAA and/or JGTRRA treatment.
Note: If a credit for a tax paid to another state was claimed on the original return and the tax liability to the other state and/or Maryland changes as a result of the treatment of the JCWAA and/or JGTRRA provisions in either state, a revised Form 502CR must be completed using the Maryland and the other stateÕs returns to be filed including all amendments and modifications.
Pass-Through Entities (PTE)
Column 2 (lines 1 and 2) is for the amounts which would have been reported on the federal return using federal law in effect prior to enactment of the JCWAA and JGTRRA (without regard to the Special Depreciation Allowance, the special 5-year NOL carryback period and the expanded section 179 expensing).
Column 3 – Change – increase/decrease (-)
Lines 1 and 2 — Subtract the amount in Column 2 from the amount in Column 1. Enter in Column 3. Line 4 is for the change to taxable income in other related items (calculated before and after application of the JCWAA and JGTRRA provisions) that would affect taxable income. If the change decreases taxable income, enter the amount with a minus sign (-) in front of the number.
Line 1 – Depreciation Deductions
Use line 1 only for the depreciation expense deductions.
Line 2 – NOL Deductions
Use line 2 for NOL deductions. For Columns 1 and 2, limit the deductions as follows: For a corporation, the deduction may not exceed the federal taxable income. For all others, the deduction may not exceed the federal modified taxable income as determined on federal Form 1045, Schedule B.
Line 3 – Decoupling Modification from a Pass-through Entity
Use line 3 for decoupling modifications reported by a pass-through entity. Partners, shareholders or members should report only their share of the modification. Enter as a positive number if the modification is an addition and as a negative number (-) if it is a subtraction. Do not include this amount as an addition or subtraction modifica- tion on any pro forma returns.
Line 4 – Other Related Changes
If the entity is a PTE (partnership, S-corporation, limited liability company or business trust), no adjustment is made on the PTEÕs Maryland income tax return (Form 510). However, Form 500DM must be submitted with Form 510 and the PTE must provide each partner, shareholder or member a statement showing their share of the decoupling modification.
Income from a PTE
Each partner, shareholder or member that has a decoupling modification from a PTE must also complete Form 500DM. Enter the decoupling modification from the PTE on line 3 of Form 500DM. Also use this amount to adjust the income from the PTE on the pro forma federal return to determine if other related changes exist. These changes would be entered on line 4 of Form 500DM. Do not include any decoupling modification on the Maryland pro forma return.
Attachment of Forms
¥Original Return Attach the completed Form 500DM to the Maryland income tax return to be filed. Pro forma returns used to complete this form are not to be filed with the Comptroller or the IRS, but should be retained with your tax records.
¥Amended Return Attach the completed Form 500DM, schedules and pro forma returns to amended return to be filed.
For questions concerning Form 500DM contact:
Revenue Administration Division
Annapolis, Maryland 21411-0001
410-260-7980 or toll-free at 1-800-MDTAXES
www.marylandtaxes.com
Decoupling may also affect other items included in federal adjusted gross income (AGI) allowable itemized deductions, as well as Maryland addition and subtraction modifications. Because these items also affect Maryland taxable income, the decoupling modification must include an adjustment for these changes. If the net change for these items reduces taxable income, enter as a negative amount (-).
07/03
This form is applicable to individuals as well. Any taxpayer who has been affected by specific federal provisions can use this form to make necessary modifications.
Even if you are an individual taxpayer, you may need to file the 500DM form if your Maryland return is impacted by the federal provisions listed on the form.
This form can be used for any tax year where the federal provisions affect your Maryland tax return. It is essential to review past returns if they are impacted.
Filing this form is necessary if your Maryland return is influenced by the decoupling provisions. It ensures that you accurately report your taxable income.
Pro forma returns are crucial for accurately determining the amounts to report on the 500DM form. They help calculate the modifications required for Maryland taxes.
While depreciation is one aspect, the form also addresses net operating loss deductions and other related changes that may affect your taxable income.
It is important to attach the completed 500DM form to your Maryland income tax return. This ensures that your modifications are considered during the tax assessment process.
Completing the Maryland 500DM form can be straightforward, but several common mistakes can lead to complications. One frequent error is failing to provide accurate taxpayer identification numbers. This information is crucial for processing the form correctly. Without it, the submission may be delayed or rejected.
Another mistake involves not completing the worksheet accurately. Many individuals overlook the need to subtract the amounts in Column 2 from those in Column 1. This step is essential for determining the correct difference, which should be entered in Column 3. If this calculation is incorrect, it can lead to significant discrepancies in tax liability.
Some people also forget to include all relevant modifications. For instance, if there are decoupling modifications from a pass-through entity, these must be reported accurately. Neglecting to do so can result in an incorrect assessment of taxable income.
Additionally, entering negative amounts incorrectly is a common issue. When a subtraction is required, it should be clearly indicated as a negative number. Mislabeling these amounts can lead to confusion and miscalculations on the tax return.
Another area where mistakes frequently occur is in the coding of modifications. The form requires specific codes to be entered based on the amounts reported. Failing to use the correct code can result in processing delays or incorrect tax assessments.
Some individuals also neglect to attach the completed Form 500DM to their Maryland income tax return. This attachment is mandatory for the form to be considered valid. Without it, the return may be deemed incomplete.
Furthermore, not retaining pro forma returns used to complete the 500DM can lead to issues if questions arise later. Keeping these records is essential for reference and verification purposes.
Lastly, many overlook the importance of reviewing the entire form before submission. Errors can easily be missed in the rush to file. Taking the time to double-check all entries can prevent many of the common pitfalls associated with the Maryland 500DM form.
When filling out the Maryland 500Dm form, it is essential to keep several key points in mind to ensure accuracy and compliance. Here are eight takeaways that can guide you through the process:
By keeping these takeaways in mind, you can navigate the Maryland 500Dm form more effectively and ensure that your tax filings are accurate and compliant.
The Maryland 500DM form is a critical document used by taxpayers in Maryland to report modifications related to federal tax provisions. Specifically, it addresses the state’s decoupling from certain federal tax benefits, such as special depreciation allowances and net operating loss carrybacks. Alongside this form, there are several other documents and forms that taxpayers may need to complete to ensure accurate reporting and compliance with Maryland tax laws. Below are some commonly associated forms.
Understanding these forms is essential for Maryland taxpayers, especially those affected by the decoupling provisions outlined in the 500DM form. Each document serves a unique purpose in the overall tax filing process, ensuring that taxpayers can accurately report their income and claim the appropriate deductions and credits. By using these forms correctly, individuals and businesses can navigate the complexities of Maryland tax law more effectively.
The Maryland 500DM form shares similarities with the IRS Form 8827, which is used for claiming the credit for prior year minimum tax—corporations. Both forms address modifications related to tax deductions and credits that can significantly impact a taxpayer's overall tax liability. Just as the 500DM form calculates adjustments for state tax purposes due to federal provisions, Form 8827 allows corporations to adjust their tax calculations based on previous minimum tax liabilities. This ensures that taxpayers can accurately reflect their financial situation and avoid overpaying taxes due to changes in federal tax law.
Another document that parallels the Maryland 500DM form is the IRS Form 1045, which is used to apply for a quick refund due to a net operating loss. Like the 500DM, Form 1045 focuses on recalculating taxable income based on specific modifications. Both forms require taxpayers to provide details about how their deductions and losses have changed under different provisions. This process is essential for ensuring that taxpayers receive the correct refunds or credits they are entitled to, thereby supporting their financial stability during challenging times.
The Maryland 500DM form is also akin to the IRS Form 8862, which is used to claim the Earned Income Tax Credit after disallowance. Both forms serve to rectify previous tax filings by allowing taxpayers to report changes that affect their tax credits or deductions. The 500DM focuses on state-level modifications due to federal provisions, while Form 8862 specifically addresses eligibility for tax credits. This similarity highlights the importance of keeping tax filings accurate and up-to-date to ensure that taxpayers benefit from available credits and deductions.
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Lastly, the Maryland 500DM form is similar to the IRS Form 1120S, which is the U.S. Income Tax Return for an S Corporation. Both forms require detailed reporting of income, deductions, and modifications that affect tax liability. The 500DM form specifically addresses adjustments related to state taxes due to federal law changes, while Form 1120S focuses on the overall tax responsibilities of S Corporations. Both documents are crucial for ensuring compliance with tax regulations and for accurately reflecting a taxpayer's financial situation.