Colorado K-1 and adjustments to Colorado Income

[sconmifi]

When preparing my Colorado state return, how do I calculate the following:

"Schedule K-1 Decreases"

"Enter the following for each fiduciary (trust) or partnership adjustment from your Colorado Schedules K-1 that decreases the amount reported on the corresponding federal Schedule K-1. Enter amounts as positive numbers."

My question: What number do I calculate or enter from my Colorado K-1 for Schedule K-1 Decreases?

Thanks!

[AliciaP1]

You need to compare the amounts showing on the Colorado Schedule K-1 to your federal Schedule K-1.  If any of the amounts are lower than the federal Schedule K-1, you need to enter the adjustment amount (the difference) for each box.

[sconmifi]

Thanks, but which lines on the CO K-1 do I refer to? Is it just the difference between Line 1 in Column A and Line 1 in Column B -- or something else?

[sconmifi]

Also, I'm not sure what you mean by "each box." It looks like I can enter only one amount for the entire K-1, not different amounts for different boxes.

[sconmifi]

I have only one K-1 (from an S-Corp), which does show that not all income was from Colorado.

Since I have only one K-1, I presume that I will have only one entry for Schedule K-1 Decreases on my Colorado return. 

TT is asking me for a dollar amount for this one K-1, but  it provides no guidance as how to determine the amount.

Thanks in advance for clarifying this issue.

[AliciaP1]

If you did not receive a Colorado Schedule K-1 for 2022 for a Colorado company, you need to contact the issuer as it is required to be filed and provided starting in 2022.  If the K-1 operates outside of Colorado and did not need to file a CO business return, you will leave the adjustments blank because you do not have any.

@sconmifi 

[sconmifi]

I do have a Colorado K-1, from an S-corp, which operates in Colorado.

The main problem is that TT provides no guidance as how to calculate the Schedule K-1 decreases on my Colorado return. 

Is the decrease only the difference in Ordinary Business Income (loss) between Federal and Colorado -- both of which are shown on Line 1 of the Colorado K-1?

Please note that I have edited some earlier posts regarding this topic.

Thanks again.

[AliciaP1]

I referenced "each box" in my previous post but you can translate that to each line.  If the CO K-1 on any line is more than the federal K-1, you will enter the description of the line in the long box on the Increases section and the adjustment (increase) amount to get to the CO amount.  Alternatively, if a line on the CO K-1 is less than the federal K-1, you will enter the description of the line in the long box on the Decreases section and the adjustment (decrease) amount to get to the CO amount.

@sconmifi 

[sconmifi]

Thank you. 

I have entries on my Colorado K-1 for lines 1, 5, 7, 10, 11, 13, and 15. 

Which of these lines are eligible for increases and decreases on my Colorado return? 

For example, the difference between Federal and Colorado on line 13 does not seem to be suitable for an increase or decrease on my Colorado return.

And does line 15 get reported anywhere else on the Colorado or Federal return?

Sorry for all of the questions, but I find the TT instructions to be very lacking on this topic.

@AliciaP1 -- Any thoughts here?

Thanks again. 

[sconmifi]

@AliciaP1 -- Any thoughts here?

Please let me know -- even if you have no further comments to make. 

Thank you.

[AliciaP1]

You need to compare the items on your Colorado K-1 to the Federal K-1 and report any differences.  You don't say if your K-1 is from a partnership (federal Form 1065) or an S-Corp (federal Form 1120S), but you will compare box 1 from your federal form and line 1 from your Colorado form and will only report an amount in either the Increases section or Decreases section depending on if the federal K-1 is higher or lower.

For example, if your Box 1 on your Federal K-1 is $10,000 and line 1 of your Colorado K-1 is $7,000, you will enter $3,000 in the Decreses section of your Colorado individual return with a description of "Ordinary Business Income".

Then do the comparison for lines 5, 7, 10, 11, and 13.  

You will enter the amount from line 15 of your Colorado Schedule K-1 on the Take a look at Colorado credits and taxes screen, under the Business and investment credits section for Electing Pass-Trough Entity Owner Credit when you go through your state tax return.

@sconmifi 

[sconmifi]

Thank you so much, @AliciaP1.

My Federal K-1 is from an S-corp, Form 1120-S.

I follow your instructions regarding Lines 1, 5, 7, and 10 on the Colorado K-1, as well as Line 15. Thanks very much!

Here are two (hopefully final) follow-ups:

1) Regarding Line 11 -- The Federal number is a larger negative number than the negative number attributable to Colorado. Is it correct that I would enter the difference in the Increases section, versus the Decreases section?

2) Regarding Line 13 (Partner's share of toal receipts from line 8 of the DR 0106, part V) -- It appears to me that the number for Federal is just my share of the S-Corp's income -- not its profits or distributions. Also, it appears that I am not taxed at the Federal or State level on this share of the S-Corp's income. Therefore, I don't understand why I would report the difference between the Federal and State shares of the S-Corp's income on either the Increases section or Decreases section of the Colorado return. The difference is a fairly large number compared to those differences from Lines 1, 5, 7, 10, and 11.

Thanks again!

[AliciaP1 · Accepted solution]

For question 1 - yes, that would be an increase in CO revenue because it's less loss.

For question 2 - no, you should not enter anything.  The difference is because the CO K-1 is the same form whether the company is an S-Corp or a Partnership (and brand new for 2022).  So, it is reporting the K-1 according to how it links with the federal form, but the amount does not apply to you because you own shares of an S-Corp.  Leave the "adjustment" for this line blank.

@sconmifi 

[sconmifi]

Much appreciated, @AliciaP1 !

Hopefully TT will have much clearer instructions next year!

@sconmifi