Received a K1 for IL - Limited partner/Ordinary business Income - Do I need to file IL state tax? State of residence is AL.

[fyrefli]

I can't figure out if I am required to file Illinois state tax for this K1 (Limited partner/Ordinary business Income) I received. What I can find is it depends on the state. Does anyone know the laws for IL/AL ?

Also, either way, In turbo tax, should I select "Yes, we made money in other states" or "No, we didn't make money in other states."

[AmandaR1 · Accepted solution]

If you received a schedule K-1-P (Illinois schedule K-1), then you need to report the activity for Illinois. Yes you should report that you made money in other states and select Illinois. This will help the software ask the correct questions. 

[fyrefli]

As a follow up, we called the IL state tax help line and they confirmed, for a schedule K-1 Partnership, the partnership is required to file the state tax for you, so unless you made other income in IL you DO NOT need to file IL state tax.

[AmandaR1]

What the partnership pays (if they do it correctly) is an estimated tax. You must then file a PERSONAL tax return in the state to reconcile your taxes. The business cannot know exactly what your personal taxes will be. You do NOT need to file a partnership IL return, but you do need to file a state tax return - regardless of if the partnership paid your tax or not. It's just like when an employer withholds income taxes from your paycheck, it is reconciled at year end when you file for April 15th.

[fyrefli]

Interesting. We called the IL state tax help center and were assured multiple times that we did not need to file an IL state tax return unless we made other income (besides the partnership) in that state. We even double checked. It was NOT a K-1-P, it was a K-1 form 1065.