@Sondra7After doing hours upon hours of research, I figured it out. Here’s how it’s done:
- Using TurboTax Business edition (step-by-step), go to Federal Taxes/Income/Other Income/All other income and under “Description”, enter: California Small Business COVID-19 Relief Grant and the total amount. Doing so will increase your K1 Part III box 1 Ordinary Business Income (loss)
- Click on “Forms” at the top right, and then on the left navigation pane, go to California S Corporation/Form 100S p1-3. Go under State Adjustment (cont.) on line 12 “Other deductions” type "CA Relief Grant" and enter the dollar amount. Doing this will reduce your Corporate CA Franchise Taxes by 1.5% to reflect the grant deduction amount.
- Now you need to go on your personal taxes. I use TurboTax Home & Business edition and do the following: Under State Taxes, edit your CA State Returns, click continue several times until you get to a section with the heading: “Enter amounts received pursuant to the COVID-19 Relief Grant included in federal income” and enter it in the box “Small Business COVID-19 Relief Grant Included in federal income”. This will adjust form 540 8f column B (substractions) and reduce your State Taxes to reflect the grant’s deduction
I got to this site to finally figure out that adjustments due to differences between California Schedule K-1 and IRS Schedule K-1 are entered on California Schedule CA (540)
https://www.taxact.com/support/1585/2021/california-schedule-k-1-adjustments
I hope this helps you!
