If you mention the software you are using that would help to give you some assistance. You just exhibited why you should file that nonresident return every year, even if it is a loss.

Were those losses reported on the federal return? Does federal 8582 have passive loss carryovers?

MD Nonresident Form 505 and 505NR are the correct forms.

Wasn't MD tax withheld from the sale proceeds?

Ignoring - for the moment - that you may not have captured potential suspended loss carryovers in MD, I believe that their might have been tax withholding on the sale which would have been reported on a Form MW506RS as a result of the sale by a MD Nonresident.  You used to reclaim that tax on the sale of the property.  Check the closing binder/documents for that form.  [Hope it helps.]

Hi George,

I generally used TurboTax, then Drake one year, now ProConnect for a last year.  The 2023 return was done w/ TurboTax.  Although I clearly included every year that the property was in MD (when I changed software and had to enter identifying information for the rental) it didn't pick up correctly that a MD return would be a good idea.

If I didn't catch that a state with reciprocity (PA and MD) and NO positive net income in MD required a filing (and now I find that it actually.....doesn't...one result of the hearing today), I doubt any other non-tax-professional (at the time) would.  

You're spot on.  The losses were reported on the Federal return every year (and the corresponding amount on the PA returns, which disallows deductions for rental income up to the amount of any other rental income, of which there is none).

The tax withholding in MD on a sale is solely based on the proceeds (at about 8%) and as well know, the proceeds has little to no relevance to actual gain.  If I was totally exempt (as for sale of a personal residence) the MW506RS would be applicable, but in this case, nope. ;-(

Lesson to others...even if it's not required, if you've got activity in a state, try to get that return in.  I hate that it's a bit of a money-grab for accountants, but it might eventually be beneficial.  Oh....and don't trust your software to know the rules.  I'm guessing the Intuit products don't really pay attention to the state you say your operation (in this case the rental) is in and also probably just noted 'reciprocal state' and didn't require MD return.

Yes, losses were reported (and sometimes carried forward due to income limitations) on both the Federal and the PA state returns (which disallowed all rental losses since I didn't have any other rental income).  

Since losses varied annually and the amount allowed, disallowed, or picked up from carried-forward losses.....I've created some pretty involved spreadsheets to compare the Federally reported amount versue the actual and then the odd calculation that is the DM for MD (Decoupling is what they call it....for carryforward losses)  So there's a 500 DM form too (that isn't included anywhere with the income tax return information on the MD Comptroller's website...but if you search for it you can find it).

And yes, the whole point is having that MD tax withheld refunded, as it was withheld at 8% of the proceeds (which had no relevance to any actual gain amount).  And Intuit didn't handle the entire MD 505 and 505NR completely well, so the Comptroller's office just rolled ALL my income in as MD taxable to make the initial assessment!

The hearing officer was very pleasant, and I am presenting the amounts in YET ANOTHER format for them.....they do assert in their hearing instructions that tax equity is a goal so I'm hoping I will prevail.  

Since 2023 was TurboTax, you need to post on their community for help to get the proper income tied to the proper state. There are similarities to ProSeries, but nothing in Lacerte or ProConnect will get you the help you need.  This SEARCH might get you started. All of the different Intuit products are profit motives, but their support venues are not related.