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superman23
Level 2

NJ Resident Return - Partnership K-1 - Guaranteed Payment for Pension

Federal K-1 shows Guaranteed Payment which represents the payout of a pension. NJ K-1 shows the amount on column A, line 5, for pension. I think this correct in accordance with the NJ partnership and individual instructions.

The amount was entered on the Federal input screen as a guaranteed payment and on the NJK-1 input screen as pension. But this amount did not appear as income on the NJ resident return as either a pension or a distributive share of partnership income. I think I entered the amount directly on the NJ-BUS-1, Part II, (through a worksheet) in order to pick up the income on the return. This worked. But shouldn't this be reported as "pension" on the NJ return, rather than "partnership income" (this is how I read the NJ instructions)? The tax result is the same, but wouldn't this create a matching issue for NJ?

Your thoughts are appreciated.

4 Replies
tagteam
Level 15

NJ Resident Return - Partnership K-1 - Guaranteed Payment for Pension

I will page @Rick19744 re the GP issue.

Rick19744
Level 12

NJ Resident Return - Partnership K-1 - Guaranteed Payment for Pension

I don't have a solid understanding of every state tax implications, but here are my thoughts based on what you are saying:

  • The line 5 instructions seem murky at best.  Generally states follow federal in reporting for these kind of items, and it seems odd that you report this as a guaranteed payment at the federal level and as a pension at the state level.
  • It appears that the reason it is not showing up as a pension on the NJ return, is because line 21 (on the individual return) reflects your distributive share of partnership income from Schedule NJ-BUS-1, Part II, line 4; which you indicate that is the schedule you input the amount in question.
  • The instructions indicate you need to enclose (attach) a copy of the NJK-1 or the federal Sch K-1.  I'm not sure the logistics of the PA matching program at this level of partnership reporting.
  • While this may in fact be pension related, this is being reported as a guaranteed payment at the federal level.  This means that this is technically a distributive share of partnership income.  Since it is going to be taxed as ordinary income regardless of how it is reported, why not just be consistent at both levels.  Just report it as a guaranteed payment at the PA level as well.  This assumes that the PA partnership return has not been filed and can be adjusted to correct / adjust the reporting of this income.
  • The bottom line, as you note, does not change the tax result.  If you are not able to make any changes, and assume you receive a matching notice, this can easily be explained in a response.  I get that you would prefer to not get a matching notice and that is why I recommended to report the amount consistently at both the federal and PA level; strictly as a guaranteed payment and not a pension at the PA level.
*A reminder that posts in a forum such as this do not constitute tax advice.*
superman23
Level 2

NJ Resident Return - Partnership K-1 - Guaranteed Payment for Pension

Thanks, Rick.

I think the NJ government instructions are clear, even though they may not make total sense. It may be because NJ allows a pension exclusion when income is under a certain level. That exclusion isn't applicable in the situation at hand.

Regarding your 2nd bullet point, I just want to clarify. The NJ input has an area to enter information from the NJ K-1 (even though the information from the federal K-1 has been entered in the federal input - as guaranteed payment). I entered the amount as pension, as per the NJ K-1, but it did not flow to the NJ return. That is why I went directly to the NJ-BUS-1 and entered the amount as partnership income. (Alternatively, I could input the amount as guaranteed payment on the NJ K-1 input screen.)

I thought there should be a way to make this work properly. So, I'm still open to suggestions.

However, if no solution is found, I'm inclined to go with your suggestion - leave the NJ return as I have it and pick up the amount as partnership income. I don't want to see a matching notice, but I can deal with it.

Rick19744
Level 12

NJ Resident Return - Partnership K-1 - Guaranteed Payment for Pension

Follow-up comments:

  • The instructions for line 5 don't make sense; mixing a guaranteed payment and a pension.  If there is an exclusion, that is a separate issue.
  • Not sure this will help, but have you attempted to call TT technical on how to get the result you want?  I can't help with the input side.
  • Once again, I get why you did what you did.  However, TT is developed for the "more common returns", and as a result, some of the less common areas don't get the attention needed and need a work around.
*A reminder that posts in a forum such as this do not constitute tax advice.*
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