Maryland Tax Form 505 - Nonresident Income Tax Return Instructions

IMPORTANT NOTES

DUE DATE Your return is due by April 15, 2010. If you are a fiscal year taxpayer, see Instruction 26. If any due date falls on a Saturday, Sunday or legal holiday, the return must be filed by the next business day.

COMPLETING THE RETURN You must use blue or black ink when completing your return. DO NOT use pencil or red ink. Submit the original return, not a photocopy. If no entry is needed for a specific line, leave blank. Do not enter words such as “none” or “zero” and do not draw a line to indicate no entry.
You may round off all cents to the nearest whole dollar. Fifty cents and above should be rounded to the next higher dollar.

ELECTRONIC FILING INSTRUCTIONS The instructions in this booklet are designed specifically for filers of paper returns. If you are filing electronically and these instructions differ from the instructions for the electronic method being used, you should comply with the instructions appropriate for that method.

Software vendors should refer to the e-file handbook for their instructions.

SUBSTITUTE FORMS You may file your Maryland income tax return on a computer-prepared or computer-generated substitute form provided the form is approved in advance by the Revenue Administration Division. The fact that a software package is available for retail purchase does not guarantee that it has been approved for use.

For additional information, see Administrative Release 26, Procedures for Computer-Printed Substitute Forms, which can be obtained at www.marylandtaxes.com

You may also call the tax information numbers listed on the back cover to find out which computer-generated forms have been approved for use or visit our Web site www. marylandtaxes.com.

PENALTIES There are severe penalties for failing to file a tax return, failing to pay any tax when due, filing a false or fraudulent return, or making a false certification. The penalties include criminal fines, imprisonment, and a penalty on your taxes. In addition, interest is charged on amounts not paid.
To collect unpaid taxes, the Comptroller is directed to enter liens against the salary, wages or property of delinquent taxpayers.

1. What form to file?

 

IF YOU ARE A:	YOU SHOULD FILE:
Taxpayer whose permanent home (domicile) is a state other than Maryland unless you are a statutory resident,	Form 505 Nonresident Return.
Taxpayer who maintains a place of abode (that is, a place to live) for more than six (6) months of the tax year in Maryland and you are physically present in Maryland for 183 days or more, you are a statutory resident.	Form 502 Resident Return.
Taxpayer who began or ended legal residence in Maryland during the tax year, you must file as a resident for that portion of the year during which you maintained Maryland residence, even if less than six (6) months.	Form 502 Resident Return.
Nonresident of Maryland but received salary, wages or other compensation for personal services performed in any Maryland county or Baltimore City and you lived in a jurisdiction that imposes a local or earnings tax on Maryland residents, NOTE: If you have other income subject to Maryland tax, you must also file Form 505. (For further information and forms, call 410-260-7980.)	Form 515 Nonresident Local Tax Return.
Taxpayer who moved into or out of Maryland during the tax year and received income from Maryland sources while you were a nonresident of Maryland,	Form 505 Nonresident Return and Form 502 Resident Return.

2. Nonresident, resident and part-year resident

You are a nonresident if you are not a resident under any of the conditions listed below:

You are a resident if your permanent home is in Maryland (the law refers to this as your domicile) or your home is outside Maryland but you maintained a place of abode (that is a place to live) in Maryland for more than six (6) months (183 days) of the tax year and you are physically present in Maryland for 183 days or more (you are a statutory resident).

You are a part-year resident if you established or abandoned legal residence during the tax year.

If you are an active duty military member, see Instruction 27.

3. What income is taxable or reportable?

A nonresident individual is subject to tax on that portion of the federal adjusted gross income that is derived from tangible property, real or personal, permanently located in Maryland (whether received directly or from a fiduciary) and on income from a business, trade, profession or occupation carried on in Maryland and on all gambling winnings derived from Maryland sources. Adjustments to federal gross income and losses not allocable to Maryland may not be used to reduce Maryland income. You are required to file even if the net Maryland income is a loss.

4 Who must file?

In general, you must file this return if you are a nonresident of Maryland AND you are required to file a federal return based upon the income levels in Table 1 or 2 AND you received income from sources within Maryland. Remember, if your federal gross income is more than the federal minimum filing requirement for your filing status, you are required to file a Maryland return, even if the income attributable to Maryland is less than the federal filing requirement.

TO DETERMINE IF YOU ARE REQUIRED TO FILE A MARYLAND RETURN:

a. Add up all of your federal gross income to determine your total income. Gross income is defined in the Internal Revenue Code and, in general, consists of all income from any source. It includes wages and other compensation for services, gross income derived from business, gains (not losses) derived from dealings in property, interest, rents, royalties, dividends, alimony, annuities, pensions, income from partnerships or fiduciaries, etc. If any modification or deduction reduces your gross income below the minimum filing level, you are still required to file. IRS Publication 525 provides additional information on taxable and nontaxable income.

b. Do not include Social Security or railroad retirement benefits in your total income.

c. Add to your total income any Maryland additions to income. Do not include any additions related to non-Maryland income or loss. (See Instruction 12.) This is your Maryland gross income.

d. If you are a dependent taxpayer, add to your total income any Maryland additions and subtract any Maryland subtractions and non-Maryland Income. (See Instructions 12 and 13.) This is your Maryland gross income.

e. You must file a Maryland return if your Maryland gross income equals or exceeds the income levels in Table 1.

f. If you or your spouse is 65 or over, use Table 2, “Minimum Filing Levels for Taxpayers 65 or over.”

IF YOU ARE A NONRESIDENT, YOU ARE NOT REQUIRED TO FILE A MARYLAND RETURN IF:

• your Maryland gross income is less than the minimum filing level for your filing status, OR
• you had no income from Maryland sources,OR
• you reside in the District of Columbia, Pennsylvania, Virginia or West Virginia and had only wages from Maryland. See Instruction 11 for additional information.

MARYLAND TAX WITHHELD IN ERROR If Maryland tax was withheld from your income, you must file to obtain a refund of the withholding. Complete all of the information at the top of the form through the filing status, residence information and exemption areas. Enter your federal adjusted gross income on line 17 in both columns 1 and 3 and line 24. Then complete line 33*, lines 43-48, 50 and 52.

Sign the return and attach withholding statements (Form W-2 and/or 1099) showing the Maryland tax withheld equal to the refund you are claiming.

Your return is then complete. You must file within three years of the original due date to receive any refund.

Enter zero unless you claim an earned income credit on your federal return.

5 Use of federal return. First complete your 2009 federal income tax return.

You will need the information from your federal return in order to complete your Maryland return. Therefore, complete your federal return before you continue beyond this point. Maryland law requires that your income and deductions be entered on your Maryland return exactly as they were reported on your federal return. If you use a federal Form 1040NR, visit our Web page at http://individuals.marylandtaxes.com/incometax/1040NR.asp. All items reported on your Maryland return are subject to verification, audit and revision by the Maryland State Comptroller’s Office.

6 Mailing label

Remove the label located on the front cover of this tax booklet and place it over the name and address blanks of your tax return. NOTE: If you do not use a label, complete the name and address boxes located at the top of the form.

DO NOT USE YOUR LABEL IF:

• your name or address is wrong, OR
• you and your spouse are going to file separate returns and both of your names or initials are on the label, OR
• you are going to file a joint return and only one name is on the label, OR
• you are filing a computer-generated return.

IF YOUR RETURN IS BEING COMPLETED BY SOMEONE ELSE: Take this packet to your tax preparer so that the preparer can attach the label to your return.

7 Social Security Number(s)

Your Social Security number is not printed on the label. Therefore, it is important that you enter each Social Security number in the space provided at the top of your tax return regardless of whether you use a label.

The Social Security number(s) must be a valid number issued by the Social Security Administration of the United States Government. If you, your spouse or dependent(s) do not have a Social Security number, you must apply for a tax identification number with the IRS and you should wait until you have received it before you file.

A missing or incorrect Social Security or tax identification number could result in the disallowance of any credits or exemptions you may be entitled to and result in a balance due.

Valid Social Security or tax identification num bers are required for any claim of exemption for a dependent.

8 Filing status.

Check the filing status box that matches the filing status you used on your federal return unless you are a dependent taxpayer.

A dependent taxpayer is one who can be claimed as a dependent on another person’s tax return. If married, the dependent taxpayer and spouse must file separate returns. A dependent taxpayer may not claim a personal exemption. Check the box for filing status 6.

Generally, if you filed a joint federal return for 2009, you must file a joint Maryland return. Married couples who file joint federal returns may file separate Maryland returns when one spouse is a resident of Maryland and the other spouse is a nonresident of Maryland.

If you and your spouse filed separate federal returns you must file separate Maryland returns.

9 Residence information

Answer ALL the questions and fill in the appropriate boxes. If you are a Pennsylvania resident, list the township/borough in which you live along with the state of legal residence.

Your state of legal residence is your domicile addior permanent home. It is the place you intend to return to after temporary absences. You do not change or abandon a domicile until you establish a new domicile in another state. Military personnel retain their states of legal residence as shown in their records until they take specific action to change the state. Duty assignments alone do not affect legal residence. For additional information, see Administrative Release 37.

10 Exemptions

Determine what exemptions you are entitled to and complete the appropriate area on the form, including the Social Security numbers for children and other dependents. If more space is required attach a separate statement.

EXEMPTIONS ALLOWED You are permitted the same number of exemptions that you are permitted on your federal return; however, the exemption amount is different on the Maryland return. Even if you are not required to file a federal return, the federal rules exempfor claiming exemptions still apply to you. Refer exempto the federal income tax instructions for further information.

In addition to the exemptions allowed on your federal return, you and your spouse are permitted to claim exemptions for being age 65 or over or for blindness. These additional exemptions are in the amount of $1,000 each.

If any other dependent claimed is 65 or over, you also receive an extra exemption of up to $3,200. Make sure you check both boxes. Enter the number of exemptions in the appropriate boxes. Complete the EXEMPTIONS area on the front of Form 505 to determine the exemption amount to enter on line 28.

PART-YEAR RETURNS If you are required to file both a resident and nonresident return for tax year 2009, each exemption is limited to a total of $3,200. Your exemptions must be prorated on the resident return and nonresident return based on Maryland income.See Instruction 28.

11 Income and adjustments

Complete lines 1 through 17 of the Federal Income column using the figures from your federal return.

Enter in the Maryland Income column all income or loss that was derived from Maryland sources and enter in the Non-Maryland Income column all income or loss derived from non-Maryland sources. Refunds of state or local income taxes, pensions, annuities, IRA distributions, unemployment compensation and Social Security or railroad retirement benefits are not considered to be from Maryland sources for income tax purposes when these items are received by a nonresident of Maryland. Adjustments to federal gross income are not generally applicable to Maryland unless they pertain to business carried on in Maryland or services performed in Maryland.

Special instructions for residents of the following states:

The District of Columbia, Pennsylvania or Virginia: If you did not maintain a place of abode in Maryland for more than six months (183 days or more) of 2009, you are exempt from Maryland tax on your Maryland wage and salary income. Enter all wage and salary income in the Non-Maryland Income column of Form 505, even if you earned the income from services performed in Maryland. If you did maintain a place of abode in Maryland for more than six months (183 days or more), you are a statutory resident. Refer to Instruction 1 to see which form you need to file.

West Virginia: Regardless of time spent in Maryland, you should enter all wage and salary income in the Non-Maryland Income column of Form 505. You are exempt from Maryland tax on all of your Maryland wage and salary income, even if you earned the income from services performed in Maryland.

If you are a resident of the District of Columbia, Virginia or West Virginia; and the only income from Maryland sources that you had was from salaries and wages, follow the instructions for Maryland Tax Withheld in Error in Instruction 4. If you are a resident of Pittsburgh, Philadelphia, or any other local Pennsylvania jurisdiction that imposes a local income or earnings tax on Maryland residents, see the Instructions for Form 515. If your local Pennsylvania jurisdiction does not impose such a tax, see Instruction 4.

If you are a resident of one of the previously mentioned jurisdictions, and you have Maryland source income from sources other than salaries and wages, non-Maryland income will be subtracted from your federal adjusted gross income on line 6b of Form 505NR.

12 Additions to income

Determine which additions to income apply to you. Write the non-Maryland loss and adjustments on line 18 of Form 505. Include the other additions to income on line 19 of Form 505, only to the extent that they apply to Maryland-source income.

Line 18. NON-MARYLAND LOSS AND ADJUST MENTS. Enter the total amount of non-Maryland losses or adjustments to Federal income that were realized or paid attributable to a non-Maryland source.

Line 19. OTHER ADDITIONS TO INCOME. If one or more of these apply to you, enter the total amount on line 19 and identify each item using the code letter:

CODE LETTER.

a. Net Maryland additions from federal Schedule K-1 for your share of income from pass-through entities or fiduciaries not attribut able to decoupling.

b. Taxable tax preference items from line 5 of Maryland Form 502TP. The items of tax prefer ence are defined in Internal Revenue Code Section 57. If the total of your tax preference items is more than $10,000 ($20,000 for married taxpayers filing joint returns) you must complete and attach Maryland Form 502TP, whether or not you are required to file federal Form 6251.

c. Expenses paid in the current year to the extent allowed on Form 500CR such as Business Tax Credits for the Enterprise Zone Tax Credit, Employment Opportunity Tax Credit, Maryland Disability Employment Tax Credit, Long-Term Employment of Qualified Ex-Felons Tax Credit, Research and Development Tax Credit, Telecommunications Property Tax Credit and Cellulosic Ethanol Technology Research and Development Tax Credit.

d. Oil percentage depletion allowance claimed under Section 613 of the Internal Revenue Code.

e. Income exempt from federal tax under treaty but not from Maryland tax.

f. Net operating loss deduction to the extent of a double benefit. See Administrative Release 18.

g. Pickup contributions of a Maryland State retirement or pension system member. (The pickup amount will be stated separately on your W-2 form.)

h. The amount claimed and allowed as a deduction for federal income tax purposes for expenses attributable to operating a family day care home or a child care center in Maryland without having the registration or license required by the Family Law Article.

i. Any refunds of advanced tuition payments made under the Maryland Prepaid College Trust, to the extent the payments were subtracted from the federal adjusted gross income and any refunds of contributions made under the Maryland College Investment Plan or the Maryland Broker-Dealer College Investment Plan, to the extent the contributions were subtracted from the federal adjusted gross income. See Administrative Release 32.

j. Net addition modification to Maryland taxable income when claiming the federal depreciation allowances from which the State of Maryland has decoupled. Complete and attach Form 500DM. See Administrative Release 38.

k.Net addition modification to Maryland taxable income when the federal special 5-year carryback period was used for a net operating loss under federal law compared to Maryland taxable income without regard to federal provisions. Complete and attach Form 500DM. See Administrative Release 38.

l. The amount deducted on your federal income tax return for Domestic Production Activities (line 35 of Form 1040) attributable to Maryland source income only.

m. The amount deducted on your federal income tax return for tuition and related expenses(line 34 of Form 1040 or line 19a of Form 1040A).

cd. Net addition modification to Maryland taxable income resulting from the federal deferral of income arising from business indebtedness discharged by reacquisition of a debt instrument. See Form 500DM.

dm. Net addition modification from multiple decoupling provisions. See the table at the bottom of Form 500DM for the line numbers and code letters to use.

dp. Net addition decoupling modification from a pass-through entity. See Form 500DM.

13 Subtractions from income

Determine which of those subtractions apply to you. Write the amounts on lines 22 and 23 of Form 505.

Line 22. TAXABLE MILITARY INCOME OF NON-RESIDENT. Enter the amount of military pay included in your federal adjusted gross income that you received while in the active service of any branch of the armed forces of the United States.

Line 23. OTHER SUBTRACTIONS FROM INCOME. To the extent that one or more of these items have been included in your federal adjusted gross income, enter the total amount on line 23 and identify each item using the code letter.

CODE LETTER

a. Payments to firemen and policemen for job-related injuries or disabilities (but not more than the amount of such payments included in your total income).

c. The amount of refunds of state or local income tax included in line 4 of Form 505.

d. Distributions of accumulated income by a fiduciary, if income tax has been paid by the fiduciary to Maryland (but not more than the amount of such income included in your total income).

e. Profit (without regard to losses) from the sale or exchange of bonds issued by Maryland.

j. The amount added to your taxable income for the use of an official vehicle used by a member of a state, county or local police or fire department. The amount is stated separately on Form W-2.

n. Payment received under a fire, rescue, or ambulance personnel length of serice award program that is funded by Maryland county municipal corporation.

r. Enter the amount of interest on U.S. savings bonds and other U.S. obligations. Capital gains from the sale or exchange of U.S. obligations should be included on this line. Dividends from mutual funds that invest in U.S. government obligations are also exempt from state taxation. However, only that portion of the dividends attributable to interest or capital gain from U.S. government obligations can be .ernment National Mortgage Association securities.

See Administrative Releases 10 & 13.

s. The amount of interest and dividend income (including capital gain distributions) of a dependent child which the parent has elected to include in the parent's federal gross income under Internal Revenue Code Section 1(g)(7).

t. Social Security, Tier I, Tier II and/or supplemental railroad retirement benefits included in your federal adjusted gross income.

u. Up to $5,000 of military retirement income received by a qualifying individual during the tax year. To qualify, you must have been a member of an active or reserve component of the armed forces of the United States, an active duty member of the commissioned corps of the Public Health Service, the National Oceanic and Atmospheric Administration, or the Coast and Geodetic Survey, a member of the Maryland National Guard, or the member's surviving spouse or ex-spouse.

w. The lesser of $1,200 or the Maryland income of the spouse with the lower income if both spouses have Maryland income and you file a joint return.

y. Any income of an individual that is related to tangible or intangible property that was seized, misappropriated or lost as a result of the actions or policies of Nazi Germany towards a Holocaust victim. For additional information contact the Revenue Administration Division.

aa. Payments from a pension system to the surviving spouse or other beneficiary of a law enforcement officer or firefighter whose death arises out of or in the course of their employment.

bb. Net subtraction modification to Maryland taxable income when claiming the federal depreciation allowances from which the State of Maryland has decoupled. Complete and attach Form 500DM. See Administrative Release 38 at www.marylandtaxes.com.

cc. Net subtraction modification to Maryland taxable income when the federal special 5-year carryback period was used for a net operating loss under federal law compared to Maryland taxable income without regard to federal provisions. Complete and attach Form 500DM. See Administrative Release 38 at www.marylandtaxes.com.

cd.Net subtraction modification to NEW Maryland taxable income resulting from the federal ratable inclusion of deferred income arising from business indebtedness discharged by reacquisition of a debt instrument. See Form 500DM.

dd. .ment district by a qualifying residing artist from the publication, production, or sale of an artistic work that the artist created, wrote, composed or executed. Complete and attach a copy of Form 502AE.

dm.Net subtraction modification from multiple decoupling provisions. See the table at the bottom of Form 500DM for the line numbers and code letters to use.

ee. The amount received as a grant NEW under the Solar Energy Grant Program administered by the Maryland Energy Administration

ff. Up to $3,500 of the amount paid by the United States, or an agency of the United States to a qualifying employee of the United States, or of an agency of the United States. See Resident tax booklet for instructions.

The amount of income for services performed serin Maryland by the spouse of a member of the armed services, if the spouse is not domiciled to Maryland and is in Maryland solely to be gg. with the servicemember serving in compliance with military orders, pursuant to the Military Spouses Residency Relief Act. See Administrative Release 1.

hh: High Income Taxpayers with Interest on US Obligations. If you have received income from US Obligations and your federal adjusted gross income exceeds $100,000 ($150,000 if filing Joint, Head of Household, or Qualifying Widow(er)), enter the difference, if any, between the exemption amount based on your federal adjusted gross income and the exemption amount based upon your federal adjusted gross income after subtracting your US Obligations using the Interest on US Obligations Worksheet insert following this page.

If one or more of these items apply to your Maryland income, include only that part attributable to Maryland on line 23 and identify each item using the code letter.

f. Child care expenses. You may subtract the cost of caring for your dependents while you work. There is a limitation of $3,000 ($6,000 if two or more dependents receive care). To claim this subtraction from income, use the amount from line 6 of either federal Form 2441 or Form 1040A Schedule 2. You may also be entitled to a credit for these expenses. See instructions for Part B of Form 502CR.

g. Amount of wages and salaries which were no allowed as a business expense because you took the federal Targeted Jobs Credit (work opportunity tax credit).

h. Expenses up to $5,000 incurred by a blind person for a reader, or up to $1,000 incurred by an employer for a reader for a blind employee.

i. Expenses incurred for reforestation or timber stand improvement of commercial forest land. Qualifications and instructions are on Form DNR-393, available from the Department of Natural Resources, telephone 410-260-8531.

k. Up to $6,000 in expenses incurred by parents to adopt a child with special needs through a public or nonprofit adoption agency and up to $5,000 in expenses incurred by parents to adopt a child without special needs.

l. Purchase and installation costs of certain conservation tillage equipment as certified by the Maryland Department of Agriculture. Attach a copy of the certification.

m. Deductible artist's contribution. Attach a copy of Maryland Form 502AC.

o. The value of farm products you donated to a gleaning cooperative as certified by the Maryland Department of Agriculture. Attach a copy of the certification.

q. Charitable travel expense. You may subtract from income unreimbursed vehicle travel expenses for:

1. A volunteer fire company;
2. Service as a volunteer for a charitable organization whose principal purpose is to provide medical, health or nutritional care; AND
3. Assistance for handicapped students at a Maryland community college (other than providing transportation to and from the college). Attach Maryland Form 502V to claim this subtraction from income.

v. The Honorable Louis L. Goldstein Volunteer Police, Fire, Rescue and Emergency Medical Services Personnel Subtraction Modification Program. $3,500 for each taxpayer who is a qualifying volunteer as certified by a Maryland fire, police, rescue or emergency medical services organization. $3,500 for each taxpayer who is a qualifying member of the U.S. Coast Guard Auxiliary as certified by the organization. Attach a copy of the certification.

x. Up to $2500 per contract purchased for advanced tuition payments made to the Maryland Prepaid College Trust and a maximum of $2,500 per taxpayer per beneficiary for the total of all amounts contributed to investment accounts for same beneficiary under the Maryland College Investment Plan and the Maryland Broker-Dealer College Investment Plan. See Administrative Release 32 at www.marylandtaxes.com

z. Expenses incurred to buy and install handrails in an existing elevator in a healthcare facility (as defined in Section 19-114 of the Health General Article) or other building in which at least 50% of the space is used for medical purposes.

The net Maryland subtractions arise from a pass-through entity or fiduciary passing onto you its share of subtractions listed above. Determine the appropriate amount of these items and, include that amount on line 23 and identify each item using the code letter.

b. Net Maryland subtractions from federal Schedule K-1 for your share of income from pass-through entities or fiduciaries not attributable to decoupling.

dp. Net subtraction decoupling modification from a pass-through entity. See Form 500DM.

Note: Code Letter p – Pension Exclusion may only be claimed by residents of Maryland and is not permitted on the nonresident return.

14 Adjusted Gross Income (AGI) Factor

You must adjust your standard or itemized deductions and exemptions using the AGI factor calculated in the worksheet below. Carry this amount to four decimal places. NOTE: If Maryland adjusted gross income before subtractions (line 2) is 0 or less, use 0 as your factor. If your federal adjusted gross income (line 1) is 0 or less and line 2 is greater than 0, use 1 as your factor.