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Individual tax strategies
Court Ruling Means Marylanders Could Be Due a Tax Refund
Maryland residents who have filed state income tax returns in the past four years may be able to claim a refund due to a recent United States Supreme Court decision. The court ruled that the State of Maryland must provide residents a credit for the local portion of the state’s income tax with respect to taxes paid to other states (when the income passed through an S corporation).
Does this apply to me?
Residents who meet all of these criteria may be entitled to a refund of the local portion of Maryland’s individual income tax:
- Maryland’s statute of limitations for claiming refunds runs three years from the date the return was filed, including extensions. Therefore individuals who filed Maryland personal income tax returns, and/or made estimated tax payments, as residents for tax years 2012 through 2015 should be eligible. However, those who filed an extension in 2011 may still be entitled to file an amended return claiming a refund for that year, depending on the date the 2011 return was actually filed.
- Individuals who paid other states’ income taxes along with their Maryland income tax.
“Individuals who meet these criteria, and paid a significant amount of Maryland local income tax, may want to consider filing refund claims to recover that local income tax before the statute of limitations expires,” says Kathleen Thies, a state and local tax manager with CliftonLarsonAllen.
This ruling may also affect similar tax laws in other local taxing jurisdictions.
Maryland’s individual income tax system is comprised of a state component and a local (county) component. Under that system, Maryland has historically granted residents the ability to claim a credit against the state component, but not the county component, for income taxes that those residents pay on income earned in and taxed by other states. In the Comptroller of the Treasury of Maryland v. Wynne case, a Maryland couple earned income as shareholders of a Maryland-based S corporation. Due to that S corporation’s substantial multistate operations, a large portion of its income was subject to income tax in other states.
Brian and Karen Wynne filed as residents in Maryland, and claimed a credit for these non-Maryland income taxes against both their Maryland state tax and the county tax. On audit, the state comptroller denied the portion of the credit offsetting the local tax. On appeal, the Maryland Tax Court agreed with the comptroller; however, the state’s Circuit Court reversed and held in favor of the Wynnes, as did the Maryland Court of Appeals (which is Maryland’s highest court). The U.S. Supreme Court has now sustained this taxpayer-favorable ruling.
How we can help
We can help you know whether you qualify for a tax refund under the court ruling. If you do, we can help you determine the amount of your refund and file the required forms and paperwork.