topic Pennsylvania Royalty Income in Get your taxes done using TurboTax

Pennsylvania Royalty Income

ChrisY1966 — Fri, 07 Feb 2025 15:45:43 GMT

When royalty income is entered from the 1099-Misc on the federal return it is not transferred properly to the state return. Instead of showing up as royalty income, it shows up as Business income which is incorrect. As a result the Pennsylvania return is not correct.

Re: Pennsylvania Royalty Income

mesquitebean — Fri, 07 Feb 2025 16:04:39 GMT

Under your question it shows you are using TurboTax Business. Is that correct? Or is that incorrect and you are working on a personal return in the Home and Business product?

You didn't say what type of royalty, so I'll assume mineral property.

I can't help you with TurboTax Business, but in the Home and Business product after entering a 1099-MISC for royalty, a subsequent screen asks if it is from investment property or if it is related to one's business, and then it knows which topic/form to flow to. If this is investment property, did you see any such screen where you could indicate that?

Re: Pennsylvania Royalty Income

ChrisY1966 — Fri, 07 Feb 2025 16:19:50 GMT

I am using TurboTax Business. The royalties are from oil and gas. The royalties are paid through a partnership LLC and that is probably why it thinks it is business income as opposed to royalty income.

Re: Pennsylvania Royalty Income

mesquitebean — Fri, 07 Feb 2025 16:34:29 GMT

I'll ask a tax expert @DaveF1006 to help you when he's available. (thanks, DaveF1006)

Re: Pennsylvania Royalty Income

Wallymortar — Tue, 18 Feb 2025 01:25:08 GMT

ChrisY1966, I have exactly the same question and issue except my royalties are paid to a Limited Partnership. Did you get an answer to your question? Sometimes, TurboTax hides some small checkbox that affects how income flows from that point forward, but I went back through TurboTax Business, paying close attention to that sort of thing and everything I did seems to be correct. Up front, my business is identified as a Limited Partnership with oil and gas royalties. Further on in the income section, I clearly entered the royalties as royalty income, so it should flow properly. I have 3 partners, counting myself and 3 income categories: royalties, interest & ordinary business expenses. The info flows correctly to the K-1 with expenses showing negative in Part III, Line 1, interest on line 5 & royalties on line 7 but it get hosed up on the PA RK-1 & NRK-1 where the net income shows as PA taxable income on line 1 & nothing on line 5, royalties (RK-1) or line 3, royalties (NRK-1). The issue I have with TurboTax Business is that it doesn't populate Partner's Capital Account data in Block L of the K-1. I'm going to keep researching but hope to get an answer. Let me know if you get resolution on this issue. Thanks.

Re: Pennsylvania Royalty Income

ChrisY1966 — Tue, 18 Feb 2025 01:46:31 GMT

Unfortunately I haven’t gotten this resolved through TurboTax. I had to manually move the business income to royalty income on the PA return. Also, if you aren’t aware, PA now allows a 15% depletion deduction like on the federal return. This was passed in July last year but not really made public.

Re: Pennsylvania Royalty Income

Wallymortar — Tue, 18 Feb 2025 02:09:27 GMT

Chris, Thanks for the quick reply and update. Your solution was exactly my fallback course of action if I couldn't get a fix from TurboTax. Given the 1065 isn't due until 17 Mar, I was willing to give it some time to percolate through the system. I didn't know PA officially blessed the 15% depletion but, truth be known, TurboTax had been giving it to me for several years and I was ignoring the previous warnings about depletion not equaling depreciation. My tax advisor was filing for depletion for PA clients for years and never got challenged.