California Pass-through entity (PTE) elective tax

[dketwr]

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?

[ZoltanB45]

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]

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...

BobNogg CPA

[dketwr]

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

[dwu805]

Are you sure -- it doesn't seem like it. When I type 3804 in the search bar, nothing comes up

[PatriciaV]

To easily generate Form 3804, go to Forms mode (icon in TurboTax header).

1. Click on Information Wks under California in the left column.
2. Once the form opens in the large window, scroll down below Part II to the Form 3804 Pass-Through Entity Elective Tax section.
3. Check the box to elect to pay the PTE tax.
4. Use the QuickZoom buttons to open either Form 3804 worksheet or Form 3804.

[dcowan]

For TurboTax Online there is no "Forms Mode." So, how do I add Form 3804 if I am using TurbTax online?

[PatriciaV]

@dcowan Most of this thread relates to creating Form 3804 in a California Business return, not for a personal return using TurboTax Online.

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

1. 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.
2. Then go to Partnership K-1 Adjustments. Continue past the first page, to go to the second page in the adjustments screen.
3. 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.

[dcowan]

Thanks for your clarification, Patricia. Can you point me to a thread or a solution to create Form 3804 for an S Corp which is also a Pass Through Entity and also required to claim back the appropriate tax credit? I'm sure Intuit would not create a solution for Partnerships and LLCs but not not for S Corps.  

[ZoltanB45]

In the same manner that you would enter Partnership K-1 Adjustments you would see the 1120S K-1 adjustments. Just follow the same preliminary steps to get to that point.

[chrisjli]

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]

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

[dcortez]

I was unaware of PTE when filing my  returns for 2021. TT Premium/Business does not seem to have it. For 2022, I will try again. My business income is reported on Sch. C. The business is a single member LLC.  So as I understand it, on my federal return I report an expense for the 9.3% tax paid on my CA return using the new CA forms. On the same CA return I claim a credit for the 9.3% paid. Now for the next question: Since this 9.3% CA tax is deducted on my Fed Sch. C, must I pay it before my 2022 tax year ends. Or can I pay it any time up to the April 15 2023 tax deadline.  

[katonaleegp]

Do you happen to know:  Do you submit only the portion of (estimated) PTE paid *during that year* e.g. for tax year 2022 only the part of PTE paid within 2022, or may you deduct *all* of your PTE paid for tax year 2022, some of which is paid in 2023?  Turbo Tax asks us to include taxes "incurred or anticipated" (I forget the exact language used but they explicitly separate tax payments already made and added another word suggesting taxes "to be paid" for that tax year). 

[SantinoD]

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