K-1 box 14 problem, TurboTax keeps showing error

[hntrust]

I received a K-1 for distributions from a trust account.  Box 2a and 2b show ordinary and qualified dividends of $1,993. Box 12 shows codes A, B, J for Alternative min tax adjustment. All boxes have -331. Box 14 shows code B of 8, code E of 1,993, code I of 22, and three items of code Z. The three Z items are:

Z  (Foreign Gross Receipts and Expenses Total: 3,592)

Z  (AMT Foreign Taxes Total: 8

Z  (AMT Foreign Gross Receipts and Expenses: 3,618)

As I click through TurboTax and enter information from the K-1, I then get the message: U.S. source income plus foreign gross income sourced at beneficiary level should not be greater than total gross income sourced at beneficiary level. 

The program wants me to enter U.S. source income. On the K-1 it doesn't have a category for U.S. source income so I left that entry blank. Now when I do the federal review I get the error message showing the K-1 worksheet and telling me to enter U.S. source income. TurboTax won't allow me to e-file until this error is fixed. Now what?

[DaveF1006]

This is a revision from my earlier post. First of all, don't change the B to a Z. Your foreign taxes are reported correctly.

Secondly, when you enter your Box 14 information, leave the amount for code Z blank and then record your other amounts and codes as they appear on your K-1in Box 14. When you press continue at the bottom of the page, there will be a screen that will appear asking for Box 14 Code Z information. Here enter information exactly the way it is recorded in this screenshot.  

The error you are receiving relates to the foreign tax credit information for Code B in Box 14. The foreign source income amount that the tax was based on should be $3592 with the information you gave.  Look through your disclosure statement to see if there is any income sourced at the beneficiary level.  If none is listed anywhere in a statement, you can do one of two things.

1. You can call the issuer of the k-1 and ask if there is US income sourced at the beneficiary level.
2. If none exists, then place a zero in that section. i will illustrate both in the following screenshots.

Assuming if $1000 was income sourced at the beneficiary level.  Here is how this would be entered.

Here the top line is a total of all income is is the sum of Foreign sourced income at the beneficiary level + US income sourced at the beneficiary level, assuming there is US Sourced income at the beneficiary level.  This is the source of your error because the sum in the top box does not match the other two entries.  

As I mentioned, if you do not have US sourced income at the beneficiary level, place a 0 in the second box and report in this manner.

 {Edited 04/06/23} (8:18 AM PST} @hntrust

[hntrust]

Can you give a screenshot of which screen I should change the Z to a B and what the dollar amount entry should be? Box 14 already has a code B entry of $8. Thanks

[nello]

In my humble opinion, your advice is mistaken. 

First, you are getting rid of the diagnostic error by arbitrarily and likely erroneously entering a zero in the US Source Income.  Instead, @hntrust needs to get either the Total Gross Income or US Gross Income from the preparer of the K-1.  (Total Gross Income less US Source Gross Income is equal to the Foreign Source Gross Income; enter either Total or US and TurboTax will calculate the other for you.)

Second, there is no need to change the code on AMT Foreign Taxes Paid from Z to B.  TurboTax does nothing with this amount by itself.  If @hntrust  is subject to Alternative Minimum Tax (AMT) then he’ll have to utilize this and other AMT adjustments by entering them manually in the appropriate schedule(s).  In fact changing the code is just simply wrong.  ( @hntrust says that he’s already input a Code B amount.)

[hntrust]

Okay, thank you. That solved the problem and I can e-file now. 😀

[gglockner]

Help, I'm having a similar issue with TurboTax Premier 2023 (Desktop). Specifically, in form K1S Box 14 Foreign Transactions, in lines C, I, and J (Shareholder level foreign income and expense),  I get the error for Line 1: "Sch K-1 Wks-S Corporations (...) -- Sch K-1 S Corporation Additional Info 1: U.S. source gross income sourced at shareholder level plus foreign gross income sourced at shareholder level should not be greater than total gross income sourced at shareholder level".

I am able to enter the U.S. Source and Foreign Source for Gross income sourced at shareholder level, but I am unable to set the Total. Screenshot attached (data obfuscated).

[Mike9241]

Turbotax instructions

The source (U.S. versus foreign) of some income is determined based on the residency of the shareholder. The program will assume that the shareholder is a U.S. citizen or resident and enter the entire amount for line C in the U.S. Source column in the subschedule.   thus if some is foreign source you correct in the subschedule

[gglockner]

Update: I can make the error disappear by setting Line 1 (Gross income sourced at Shareholder Level) to 0 for Foreign. But the K-3 I received from the S-Corporation has a non-zero Total Gross Income for the US and foreign sources in Part II, Section 1, Line 24. 

I realize this is a worksheet that is not submitted with the taxes so using a 0 value is not an issue, but I wonder if I have some other value incorrect in the K-1 or K-3 from the S-Corporation.