ISSUE: Turbotax is accurately computing RI income and tax on a full-time non-resident return. However, TurboTax is not accurately carrying from a 2024 RI non-resident return, Schedule II, column A, line 12 the amount of Modified Federal AGI allocated to RI sources to MA 2024 Schedule OJC “Amount of Income on which you paid taxes”. Specifically, the amount of income shown on Schedule OJC does not include the amount from RI Schedule II, line 9, Column A, Adjustments to AGI from Federal form 1040, line 10. Therefore, the MA return overstates the amount of income earned in and tax paid to RI which understates the amount of income allocated to MA and the amount of income tax due to MA.
EXPLANATION: I am filing for my wife and me a multi-state return – Rhode Island as a full-time non-resident and Massachusetts as a full-time resident. We are filing MFJ status. All of my income is MA income. My wife earns all of her income in RI, some of it W-2, the rest reported on form 1099-NEC. She has limited Schedule C expenses (i.e., not a business loss) and receives a self-employment tax deduction reported on Form 1040, Schedule 1, line 15 which gets carried to Form 1040, Schedule 1, line 26.
Per the 2024 INSTRUCTIONS FOR FILING RI-1040NR for RI Schedule II, line 9, Column A – Adjustments, “Enter amount from Federal Form 1040, Federal Form 1040-SR, or Federal Form 1040-NR, Schedule 1, line 26 applicable to Rhode Island income.” Since all the 1099-NEC income was earned in RI from a RI source, all the self-employment tax deductible from federal income is also a deduction from RI income on Schedule II. This amount gets entered to Turbotax on the ‘Rhode Island adjustments to income’ entry screen and is accurately reflected on RI Schedule II. However, the same amount as the deductible part of self-employment tax is added back to RI income when the amount of income shown on RI Schedule II, column A, line 12 gets carried over to MA Schedule OJC.
