Guaranteed payment not transferring to state return correctly

[Mike860]

I have an LLC (form 1065) with 2 partners, with 1 partner receiving a guaranteed payment.  When entering in deductions in TurboTax Business I'm allocating by amount all of the payment to 1 partner.  The federal schedule K is correct; however, when the payment is transferred to the state return (PA) it's allocating the guaranteed payment to the state schedule PA RK-1 based on the profit percentage instead of the allocation by amount.  I don't see where this can be corrected.  How can I get the state to correctly allocate the guaranteed payment?

[AliciaP1]

It would be helpful to have a TurboTax ".tax2022" file that is experiencing this issue.

You can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions: 

At the top menu in the black line at the top of the page go to Online. 

1. From the menu, select Send Tax File to Agent. 
2. You will see a message explaining what the diagnostic copy is.  Click Send and then you will get a Token number. 
3. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@Mike860 

[Mike860]

The token number is1078738.  While I don't think what it's doing is correct for PA, it does have the effect of eliminating the guaranteed payment equally between the partners, because the company net income was reduced by the guaranteed payment, which effected the partners income by the profit split.  What the program is doing is putting the PA income for the partners to the point it would be at if the guaranteed payment was never made.  At this point I'm not sure which way is correct for PA.

[AliciaP1]

Your return is reporting the amounts correctly because PA does not treat guaranteed payments the same as federal.  PA treats guaranteed payments as a withdrawal proportionately from the capital of all partners regardless of who took the actual guaranteed payments.

@Mike860 

[Mike860]

Ok, as I mentioned, I was beginning to wonder if that was the case, but I couldn't find anything definitive.

Thanks for your help.

[des104]

I'm have the same issues with my 3 LLCs on my State of Alabama returns.

Tokens:

1079922

1079924

1079927

[AliciaP1]

It looks like there is an issue with the Guaranteed Payments allocation to partners within the Alabama Partnership Form 65 and I'm having our technical team look at it, but there is a way to enter the information so you can continue with your filing.  Also, the first two tokens you provided are for the same business, so I'm not sure this is the same issue there, but it is for the first token and the last token.

You need to switch to Forms mode and enter the information on the K-1 worksheet for each partner.  To do this in TurboTax Business you can follow these steps:

1. Within your tax return use the Forms icon in the upper right of the screen to switch to Forms mode
2. Scroll down in the menu to the left to Alabama Partnership and click Sch K-1 Wks
3. On the first K-1 worksheet in the preview pane, enter the Guaranteed payments - for services in box T and Medical insurance premium paid for partner in box U
4. To get to the next partner's K-1 worksheet click the down arrow on the scroll bar immediately to the right of the boxes (so still on the form not all the way to the right on the screen)
5. Continue to go through until you have entered all the payments for each partner on the return
6. Use the Step-by-Step icon in the upper right of the screen to go back to the interview and finish reviewing your returns

@des104 

[davidorr]

This appears to be an issue with Turbo Tax Business form 1065 in general. When entering Guaranteed Payments under Deductions>Compensation and Benefits, the guaranteed payment amount does not transfer to the Schedule K-1 worksheet. Which means it also does not transfer to the Schedule K-1 for the partner.

[AliciaP1]

I can't recreate your issue in a test return.  It would be helpful to have a TurboTax ".tax2022" file that is experiencing this issue.

You can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions: 

At the top menu in the black line at the top of the page go to Online. 

1. From the menu, select Send Tax File to Agent. 
2. You will see a message explaining what the diagnostic copy is.  Click Send and then you will get a Token number. 
3. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@davidorr 

[davidorr]

Thank you, Alicia. I was able to correct the issue following your steps of switching to the forms and editing the schedule K worksheet. Just wanted to let you know that it was an issue. 

[CarissaM]

Happy to hear you were able to get this resolved. 

Please let us know if you need further assistance. 

[1304ninthllc]

Alice, that makes completely no sense. If one partner was paid through guaranteed payments for services rendered. That partner should bare the taxes incurred for that payment to him. Why would it evenly split among all the partners? 

I am having the same issue. In previous partnership returns, I see my prior tax accountant would align the guaranteed payments for services rendered to the one partner. How do I go about modifiying it so it doesn't allocate it three ways? This is for a Pennsylvania state return. 

Token number 1209116