Easily Report State Income Taxes Paid on Composite Returns

[Ed Bird]

For owners of pass-through entities (such as S-Corporations or LLCs), with K-1 income in multiple states where you are a non-resident, in TurboTax you can easily report state income taxes paid on your behalf by the company on composite returns. To do this, you must 1) complete your Federal return accurately, then 2) purchase at least one non-resident state return from TurboTax (about $50). Complete the state return for this state, reporting the K-1 income and income tax paid to this state. Then, 3) complete your resident state return. During this resident state return, you will be given the opportunity to report income and taxes paid to other states (including taxes paid via composite returns). Why is this important? Many states where you are a resident allow a deduction or credit for state income taxes paid to other states. You will want to report non-resident composite payments so you can receive this deduction/credit.

Note: Remember, if you don't need to file the state return you purchased in step 2 above (because a composite return was already filed/paid on your behalf by your company), you don't have to file this return (i.e., you don't have to double file). But, TurboTax requires you to complete at least one non-resident state return in order to unlock the opportunity to report composite payments to other states.

[Gatorjar68]

I appreciate the explanation on how TurboTax works. However, how do you unlock the ability to enter composite tax payment information if you live in a state where you don't have to a file a resident tax return (i.e., FL)? 

[Critter-3]

@Gatorjar68 

If you do not itemize deductions then skip this all together  or if the state sales tax deduction is higher than the state taxes + RE taxes  then again skip this entry.

However, if you do itemize and the SALT section of the Sch A will be greater than the sales tax deduction then go to the Deductions & Credits tab ...

[Jeff D1]

Can I file a South Carolina Composite tax return using turbo tax.  I filed the fed and state but need to do a composite return as well for out of State members we paid taxes on.

[PatriciaV]

Please clarify where you wish to prepare the composite tax return. Is this for an individual (TurboTax 1040) or a company (TurboTax Business)?

[Jeff D1]

Hello,  So we have a Corp 1065 and then need to do a SC1040 which is the individual tax return for South Carolina.  However, the Corporation is who is listed and there is a box on the South Carolina form 1040 that you check for Composite return.  Either using step by step or the open form Turbo Tax will not let me check that box.