Rev. Rul. 56-124

Advice has been requested relative to the deductibility, for Federal income tax purposes, of the income tax withheld from an individual (cash method) taxpayer's salary or wages, and/or of the estimated income taxes paid by him to the State of Maryland after July 1, 1955, pursuant to legislation enacted by the general assembly of Maryland in 1955.

In accordance with the provisions of subsections (a) and (j) of section 308 of Article 81 of the Annotated Code of Maryland, 1955 Cumulative Supplement, as enacted by Section 5, Chapter 281 of the laws enacted by the General Assembly of the State of Maryland, in 1955, which became effective June 1, 1955, withholding of income tax on salaries and wages of both residents and nonresidents of Maryland began on July 1, 1955. Individuals receiving taxable income which is not subject to Maryland withholding were required to file declarations of estimated Maryland income tax on or before September 15, 1955. Under the law, not less than one-fourth of the estimated tax must be paid with the filing of the declaration. For the calendar year 1955, the first installment of the estimated tax was required to be paid with the declaration filed on or before September 15, 1955. The second installment was due on or before January 15, 1956. The remaining one-half of the estimated tax due for 1955, is payable with the filing of the annual return on or before April 15, 1956. For 1956, and subsequent years, the estimated tax is due and payable, in installments of not less than one-fourth each, on or before April 15 (when the declaration is due) June 15, September 15, and January 15. For fiscal years beginning on or before June 1, 1955, a declaration of estimated tax was required to be filed by September 15, 1955; for fiscal years beginning after June 1, 1955, the declaration is required to be filed by the 15th day of the fourth month of such fiscal year.

Section 164(a) of the Internal Revenue Code of 1954 provides that in computing taxable income there shall be allowed as a deduction taxes paid or accrued within the taxable year, with certain exceptions not here material.

Under the provisions of section 461(a) of the Code, the amount of any allowable deduction or credit is to be taken for the taxable year which is the proper taxable year under the method of accounting used in computing taxable income.

In view of the foregoing, it is held that the amount of Maryland State income tax withheld from an individual (cash method) taxpayer's salary or wages, and/or the amount thereof paid by such taxpayer as estimated tax, is deductible from adjusted gross income in arriving at taxable income, for Federal income tax purposes, in the taxable year withheld and/or paid, providing the taxpayer does not elect the standard deduction provided in section 141 of the Code.