Received K-1 from a trust

[Earlybird]

Hello - I have already filed my Federal return as well as 2 state returns (part year resident in both for 2023).  We were not aware we were going to receive a K-1 which arrived today.  I have never reviewed a K-1 before, but I am in the process of amending all of my returns in Turbotax and am running into some questions.  I hope someone can help.

1.  The K-1 has a supplemental page which lists Municipal interest amounts and Foreign income amounts.  There are no foreign taxes-  just foreign income.  How do I enter this foreign income during the amendment of my federal return?  This income is not listed in Box 14B on the K-1 (nothing is in 14B), but the supplemental page says "Foreign Tax Credit Information Line 14, Code B" "Enter the following on Form 1116 or Schedule A".  I did have to file Form 1116 when my original return was filed.   If I go in now and try to add something on Line 14B of the K-1, that is really a foreign tax credit line item and there were no taxes.  Just income that says "Other Country" with no further description of the type of income.

2.  This K-1 was for income received in the second state I lived in last year - NC, but I also filed a GA return.  It looks like I have to amend all 3 since my Federal AGI will change, and that then changes the states.  Does that seem correct?

4.  For NC where this income was received, there is a final supplemental page to the D-407 form we received with the K-1 for the state of NC.  This supplemental page is titled "North Carolina Fiduciary Adjustment detail" And shows "additions" - the additions agree to schedule K-1 Box 14A, but the subtractions and the "net fiduciary adjustment" amount are not things I see on the K-1 or the D-407.  Is this supplemental page just informational or is it relevant to how I enter this in my returns?

This is all rather complicated, but the dollars are small.  I just want to get it right.

Thanks

[ThomasM125]

Since you didn't pay any foreign taxes, you can leave that section alone. Any foreign income that needs to be entered on your tax return should be included in the amounts entered on lines  1 to 11 on a Form 1065 schedule K-1. The only reason you might need to enter it is if you reported foreign taxes elsewhere on your tax return, in which case you could enter the foreign income where you apply for your foreign tax credit.

If you add income to your federal return, it may result in taxes due on your state return, but not necessarily, especially if the income was not earned in one of the states your filed for. If the state tax does not change, you don't need to submit an amended return for that state. You should prepare the state amendments though to see if the tax changed. 

The supplemental information is used to determine how to handle entries on the schedule K-1, it is not normally additional income, deductions or credits that need to be added. So, if you see questions in TurboTax as you enter the schedule K-1 information, you can refer to the supplemental information for clarification.

[Earlybird]

Thanks for the quick reply.  The form I received is a Schedule K-1 (Form 1041) rather than a Form 1065.

I did enter foreign taxes paid on my original return.  I am not sure how to enter the foreign income from this K-1? The question process really doesn't lend itself to my situation.  It's only $5! Any advice for this? Where would it show up on the 1040X?

After entering what I am able to, it appears that I end up in a refund position with federal and one state - all small dollars.  And the other state, I will owe small dollars.  Do I need to amend the state where I would get the refund which is the state that this income/loss isn't allocated to? The only thing that changes on that return is the AGI from the federal and then the Schedule 1 tax exempt interest amount (state of GA).  When the trust files the K-1, will it look as though I have not reported this income/loss if I don't amend all returns? I will be filing returns in GA for a few more years after 2023 if this matters.

Thanks again

[ThomasM125]

The only reason to enter the foreign income in the foreign tax credit section is it may increase your foreign tax credit. But if it is only $5 there is no reason to bother with it. Applying for the foreign tax credit is optional, so you don't need to report the minimal income amount in that section. It would only be reflected on the Form 1040-X if your foreign tax credit increased.

You don't need to file the amended return for the state with a refund if you don't want to bother with it, only if your tax increased. The state returns are not inter-related as far as the taxing authorities are concerned, so it won't matter if you file certain amended returns and not others. 

[Earlybird]

Thank you for all of the help.  I am reviewing my amended return and a Schedule E (just page 2) is produced with my amended return.  The Trust name is noted in Part III, but none of the income/losses entered from the K-1 Form 1041 carry over to this Schedule.  All of the items I entered ended up on the 1040X and 1040 in their individual rows - interest, dividends, capital loss so it is reflected in my numbers, but I don't know why this schedule E was produced with no numbers. There is also this note on the Schedule E:

Caution: The IRS compares amounts reported on your tax return with amounts shown on Schedule(s) K-1.

I went back through my K-1 Form 1041 entry and it seems I entered it correctly.

[Earlybird]

I should note that overall the K-1 creates negative income due to a capital loss.