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Returning Member
posted Feb 16, 2025 9:19:55 AM

Filing Alabama 40NR. I had an IRA conversion. Its OK on Federal return. Expected it to be in Part I of Schedule RS, but TT didn't create Sch RS. How do I get Sch RS?

The conversion was not taxable to Alabama, and no AL tax was withheld. I think reporting the conversion is required on RS so proper amount would show up on 40NR Part I Line 3, and be considered when calculating the correct prorating percentage.

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1 Replies
Expert Alumni
Feb 22, 2025 8:04:53 AM

No, it isn't needed due to the way AL taxes nonresident income - it just taxes AL income, no prorating. 

 

States follow two basic patterns for calculating tax liability for nonresident returns.

  1. Determine AGI received from that state. There may be deductions and exemptions that can also be prorated and subtracted from state sourced AGI. This yields taxable income.
  2. Prorate tax calculated as if a full year resident. This means tax is calculated as if you were a full year resident and then prorate the tax using the ratio of state sourced income divided by total income.