Because you are using the Business software to generate the K-1 and then likely using a Personal version (Premier or Home & Business) to file your individual D-400, there are two distinct points wher...
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Because you are using the Business software to generate the K-1 and then likely using a Personal version (Premier or Home & Business) to file your individual D-400, there are two distinct points where a disconnect can happen.
Part 1: Fix the K-1 in TurboTax Business
The deduction on your personal return is triggered by data on the NC K-1 Supplemental Schedule. If that schedule is blank, your personal return won't "know" there's a deduction to take.
Check the Supplemental Schedule: In TurboTax Business, switch to Forms Mode (top right).
Open the NC K-1 Supplemental Schedule for each partner.
The income amount should appear on Line 38, Part B. If it is $0 or blank, the software isn't pulling it from the D-403 Part 4 automatically.
If it is "0" or blank and you are in the desktop version of TurboTax, you may need to override Line 38 on the Supplemental Schedule and manually enter the partner's share of the taxed income. This ensures that when the K-1 is produced, the "data" exists for your personal return to read.
Part 2: Fix the Personal Return (D-400)
Once the K-1 is corrected, your personal return should pick it up. If it still doesn't produce Schedule S, you must manually trigger the deduction:
Go to the North Carolina state interview in your personal TurboTax software.
Look for a screen titled "Tell Us About Your State Schedules K-1".
When entering the NC K-1 details, look for a field specifically for "Taxed Pass-Through Entity Income" (usually under a "Deductions" or "Adjustments" sub-menu).
Enter the amount from your K-1 Supplemental Schedule here. This will force TurboTax to generate Schedule S and populate Line 38a.
Check your D-400, Line 9. It should now reflect the deduction, reducing your NC taxable income so you aren't taxed twice.
What is causing this is unknown. The “Taxed Partnership” election is still fairly new (going back to 2022/2023), and TurboTax’s automatic mapping from the entity return (D-403) to the individual return (D-400) through the Supplemental Schedule has had ongoing issues.