TurboTax Not Allocating Properly for GA Non-resident Return?

[agunter137]

I have a gain from liquidation of a limited partnership in Georgia. I am a resident of another state and was a passive investor in the partnership. Georgia Form 500, Schedule 3 requires allocation of income items between GA and non-GA sources. That includes pension benefits which, in my case, come from past employment not in GA. TurboTax is applying the Retirement Income Exclusion as fully applicable to my GA income even though Schedule 3 seems to require allocation of all income between GA and non-GA sources. Assigning it all to GA certainly gives a favorable result, but is that really in compliance with GA tax code?

[DaveF1006]

I have prepared a mock return to see if  retirement income is reported on your Georgia Schedule 3 and then excluded.  I do not see that. The only income that is reported is an amount of a k1 that entered and included as Georgia income when I performed the income allocations in the preparation of the Georgia state return.

The only reason i can think of is that you did not allocate your pension distribution from Georgia properly. To do this, go to:

1. Your state tab in your Georgia return.
2. Go to Georgia income and adjustments
3. Scroll to your pensions/annuity and IRA distributions
4. Allocate your entire pension amount to the other state
5. I have a screenshot below that illustrates this.
6. Also, check your GA return to make sure that you are reported as a Georgia non-resident.
7. Also, if you entered the retirement exclusion in the section that says Here is the income Georgia Handles Differently and completed this section, remove all the information from this section of the return.
8. Now, if you look at Schedule 3, there should be no mention of your retirement income.

Here is the screenshot i mentioned. Let us know if this helps.

[agunter137]

Many thanks for the fast answer and the time you spent on it. I’ve delayed in following up because I have been going around in circles on my Georgia return but I’ve finally got a handle on it. My question probably wasn’t as clear as it could have been. It wasn’t my pension benefits that were being allocated to Georgia, it was Georgia’s Maximum Retirement Income Exclusion amount. All of my pension was entered as non-Georgia income, but TurboTax was still using the Maximum Retirement Income Exclusion as an offset to my Georgia income. I was troubled by why I was getting a benefit on my Georgia taxes based on non-Georgia income.

Turns out that this is totally appropriate, but there’s a twist that TurboTax has caught but H&R Block Software 2022 seems to have missed. The amount of the Exclusion is calculated separately for earned versus unearned income with each prorated based on the ratio of Georgia income to non-Georgia income regardless of whether or not Georgia income includes any pension income. These prorations is not apparent from the tax forms themselves (Schedule 1 of Form 500 in particular) but are clearly shown in the example calculations shown on page 17 of Georgia Form 500 IT-511 Individual Income Tax Booklet.

While TurboTax takes both prorations into account, I believe there is still an error in how the two are coordinated. The maximum for earned income is the lesser of Georgia earned income or $4,000. The maximum for unearned income ($35,000 or $65,000 depending on age) is first reduced by the portion of the $4,000 used for earned income. If there is no Georgia earned income, as in my case, none of the $4,000 is used. However, TurboTax reduces the overall maximum by the amount of the earned income (presumably no more than $4,000; being retired, by earned income was less than that). For example, someone over age 65 with $3,500 of earned income, none of which is from Georgia, would have no Exclusion for earned income. But rather than prorating the full $65,000, TurboTax first reduces it to $61,500 resulting in a lesser subtraction from Georgia income.

[DanaB27]

It would be helpful to have a TurboTax ".tax2022" file that is experiencing this issue. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Online: 

1. From the left menu select Tax Tools. 
2. Then select Tools below Tax Tools. 
3. A window will pop up which says Tools Center.  
4. On this screen, select Share my file with Agent. 
5. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number. 
6. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

The instructions for TurboTax Download: 

1. On your menu bar at the very top, click "Online"
2. Select "Send Tax File to Agent"  
3. Click "Send"
4. The pop-up will have a token number
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.