Form 568 imports income incorrectly

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Form 568 imports business income from my federal return solely by totalling the 1099’s received. But those 1099’s include expense reimbursements. While I can deduct them on my federal return, where can I do that on the CA return? The LLC form is saying I made more that $250,000 causing a $900 fee to be assessed. But it’s not all income. Removing the expense reimbursements would reduce it to under $250K . It is not accurate. Please help! Thank you.

M-MTax

Level 15

You can adjust this by entering a California-specific business income adjustment within the California state interview section of TurboTax, or by utilizing Forms Mode to manually correct the worksheet.

Under California tax law, the California LLC fee is assessed based on your "Total Income" from Schedule IW (Gross Receipts plus Cost of Goods Sold), before any business expenses or deductions are taken. Because TurboTax automatically imports your raw federal gross receipts (including the expense reimbursements) directly onto Schedule IW, it mistakenly triggers the $900 fee for crossing the $250,000 threshold

M-MTax

Level 15

Method 1: The Step-by-Step Interview Method

You can apply a negative adjustment to your California business income so that it filters down to your Form 568:

Go to the State Taxes section in TurboTax and begin or revisit your California return.
On the California Taxes summary page, click Edit/Start next to Income and Adjustments.
Scroll down to the Business heading and select Start/Revisit next to Business Profit or Loss Adjustment.
Click Edit next to your specific LLC business profile.
Follow the prompts. When you reach the screen asking for California income adjustments, enter your expense reimbursements as a negative number (e.g., -15000) to subtract them from your California gross receipts.
This will reduce your Schedule IW, Line 1 total below $250,000 and automatically remove the $900 fee.

Method 2: Forms Mode (Desktop)

If you are using the downloadable Desktop version of TurboTax (Deluxe, Premier, or Home & Business), you can modify the form directly:

Click the Forms icon in the top right corner of your screen to switch to Forms Mode.
In the left-hand menu, locate and click on Form 568 (or Schedule IW) under the California section.
Look for the Gross Receipts / Total Income line (Schedule IW).
Right-click the field where the incorrect federal total is being pulled and select Override (or manually input the adjusted amount excluding the reimbursements if the field allows an entry).
Note: Overriding a field can sometimes prevent you from e-filing your state return, requiring you to print and mail it instead. Use Method 1 first if you want to preserve e-filing eligibility.