(California Form 568) Question U: Single Member LLC as a Disregarded Entity

[krisha]

I am filling out California Form 568 via TurboTax Home & Business, which fills in most of the information for you, thankfully. However, I am confused by something. TurboTax marked Question U1 ("Is this LLC a business entity disregarded for tax purposes?" with "No," but then put "Yes" to U2 ("If 'Yes,' see instructions and complete Side 1, Side 2, Side 3, Schedule B, Side 5, and Side 7, if applicable. Are there any credits or credit carryovers attributable to the disregarded entity?"), and left U3 blank ("If 'Yes' to U1, does the disregarded entity have total income derived from or attributable to California that is less than the LLC's total income from all sources?").

....However, I don't think these answers are correct. I am a Single Member LLC, so I'm assuming that I should answer "Yes" to U1, since (as I understand it) this makes my LLC a disregarded entity. U2 has "Yes" marked by default, but I'm not sure if this is the right answer, either. I do have an "Overpayment from prior year allowed as a credit" and I do have an entry for Section 179 on my federal forms. Is this why I'm getting a "Yes," answer? If not, I'm assuming I should just answer "No," correct? Finally, I am answering "No" to U3, because all my income has stemmed (derived) from California (I did not get any income from any other state). 

So I should put U1=Yes, U2 and U3 = No, right? Am I understanding this all correctly? Thank you for your help!

[TerryA · Accepted solution]

It's actually line U(1) that's checked Yes for everyone because this is a SMLLC-only 568 return. U(2) & U(3) cannot be checked automatically because the program has no way of knowing those things. So, yes, I would agree that probably U2 & U3 should be checked No unless you know otherwise.

[swornfriend]

Is there any way to correct this? Our return erroneously says we are NOT a disregarded entity on California 568 line U1, but there doesn't seem to be any way to change that.