California Pass-through entity (PTE) elective tax

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Hi, I'm referring to the SALT Cap workaround for California i.e. California PTE elective tax. How do I file form 1065 partnership return with PTE elective tax in TurboTax Business 2021?

TurboTax Business Windows

ZoltanB45

Level 9

In the 1065, there should be an expense labeled tax or state tax. Just enter the amount paid there and it will reduce the taxable federal income, which was the idea of the PTE Tax. Then you would enter it as a credit on the California individual tax return.

bobnogg2c

Level 2

You must include form 3804 and voucher 3893. California requires you to pay in 9.3% of partnership allocated income for each partner. Each partner must accept/reject election to SALT.

Have you read directions for form 3804? See below for instructions:

https://www.google.com/search?q=3804+cr+instructions&sxsrf=APq-WBtkziPM4gRvDujUQCVAiAthMY8sJQ%[phone number removed]080&source=hp&ei=zGYdYv6YApGs0PEPpr-PsAo&iflsig=AHkkrS4AAAAAYh103CSzbIlbXeOfUUmHYTL54C3JVZZL&oq=3804&gs_lcp=Cgdnd3Mtd2l6EAEYAzIFCAAQgAQyCAgAELEDEIMBMgUIABCABDIICAAQsQMQgwEyBQgAEIAEMgUIABCABDIFCAAQgAQyBQgAEIAEMgUIABCABDIFCAAQgARQAFgAYNwiaABwAHgAgAFWiAFWkgEBMZgBAKABAqABAQ&sclient=gws-wiz

BobNogg CPA

dketwrAuthor

Level 2

Thank you! EDIT: Turbotax 2021 actually supports form 3804 (in Forms mode).

chrisjli

Level 2

Just got my K1, there is PTE on there (13d), at ~9.3% of CA ordinary income. However, when I put all the info on the K1 into turbo tax, the CA tax due on the CA ordinary income is still calculated at 13.5% (So seems I still need to pay the full 13.5% CA tax on the K1 income). Also the federal tax due does not change (thought hte PTE elective tax should be federal tax deductible).

Could anyone kindly let me know how I can adjust this?

Thanks a lot!

chrisjli

Level 2

BTW I am working on my personal tax with Turbotax premier. The accountant generated the K-1.

SantinoD

Alumni - Intuit

Yes, you can include payments made for PTE in 2023 for 2022 Tax year as long as they are paid before the due date of your tax return.

@katonaleegp

katonaleegp

Level 2

Thank you!

Retina

Level 2

Do I leave the California estimated tax payments blank on the federal return if I made the ab150 pte election? I do see my federal taxable income reduced because of the credit on my K1. I have filed form 3804-CR. Thanks.

DaveF1006

Alumni - Intuit

I am not sure how you reported this but this amount should have reduced your California Tax but not your federal. Here is how it should have been correctly reported. if you reported this in the estimated tax section in your federal return, this is incorrect. Here is how it should have been reported. You would not enter this as an estimated tax paid in your state return either.

If you entered a K1 in your federal return, there will be questions that will generate when you begin your California state Return. As you navigate through your state return:

You will reach an entry that is entitled Partnership Schedule K-1 Summary. Select edit next to the K1. There will be some preliminary questions to enter.
Then go to Partnership K-1 Adjustments. Continue past the first page, to go to the second page in the adjustments screen.
In the second page, scroll to the section where it says credits and there will be a entry to make that says 15f-Form 3804-CR Pass-Through Entity Elective Tax Credit. This includes the AB 150 payment if you took the election.

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Freedom1095

Level 2

When I do this, I have a problem because I have an entry in my federal K-1 in box 13, code W which is state tax withheld - this then causes the program to double count this money since on the CA K-1 Adjustment page I enter the value as instructed in box 15f. This generates form 3804-CR, which correctly calculates the credit which zeros my tax, but later in form 540 the program is still taking the value I input in my federal K-1 for box 13, leaving me with a state refund the size of my entire payments to them in 2022! Clearly this is wrong.

Not sure if I should paper file the state or if I should wait for a fix?