K-1 State Schedules

[STB-Ex-User]

I spoke with a product technical representative earlier about a limitation I’m encountering in TurboTax Home & Business regarding the entry of certain state taxes on my federal return.

I receive a Schedule K-1, and with it I’m issued state K-1 schedules (for example, a California Schedule K‑1, a Connecticut Schedule K‑1, etc.). These state schedules show taxes that were paid on my behalf to each state via composite filings. In California state module, TurboTax allows me to report taxes paid to other states. However, on the federal side, the software only appears to allow entry of state tax payments as “estimated tax payments,” which requires entering a payment date. These composite taxes are not estimated payments, and the state K‑1 schedules do not provide payment dates. Because of this, the federal TurboTax product does not appear to provide a way to enter the state K‑1 schedule tax payments so that they can be claimed as state and local tax deductions on the federal return.

Can you please explain how TurboTax Home & Business is designed to accommodate full entry of all K‑1 information, including the attached state K‑1 schedules and the related state tax payments made on my behalf through composite filings? If this is not currently supported, please confirm whether there is a recommended workaround or if this is a known product limitation.

[PatriciaV]

Because States handle Pass-Through Entity Tax (PTET) payments differently, the best option to report the tax paid on your behalf is as an additional estimated tax payment. The payment should appear at some point in the state interview where you can identify the amount as applied to your state tax liability.

Assuming you received Schedule K-1 (Form 1065), report the PTE Tax Paid by the partnership as follows:

1. During the K-1 interview, enter for Box 13 Code ZZ as "Taxes and State Income Tax Withheld." 
2. Go to Deductions and Credits >> Estimates and Other Taxes Paid >> Estimates. 
3. Click Start/Update, then Start beside State estimated taxes for 20XX. 
4. Choose Add another payment.
5. Select the state from the drop-down menu.
6. Enter 1/1/20XX as the payment date and enter the amount paid on your behalf.
7. When you work through the State income tax section, look for questions about how your state handles income differently or business income adjustments.

This process will apply the PTE payment against your state income taxes due. Look for a Tax Payment Worksheet that should display the State tax withholding on Form K-1.