Why do I owe additional Federal and State tax if my Schedule K-1 distributions had taxes withheld

I have received a Final Schedule K-1 (Form 1065) from my employer for 2020, this partnership ended in Dec 2020 and that's when I was paid out and also federal and state taxes were withheld on it.

Now when I try to import my schedule K1 form 1065 in turbo tax I see that I owe additional state and federal taxes (my schedule K1 has "Net short-term capital gain (loss)" in 8. and "Net long term capital gain (loss)" in 9a.

Can you help me understand why do I owe additional taxes when taxes were held/paid at the time of distribution?

860

Expert Alumni

Apr 11, 2021 11:37:31 AM

Taxes withheld are a "prepayment"- they are sent to the IRS and will be applied to your tax liability once you file your annual tax return. You must complete your tax return to determine your taxable income- gross income less deductions and credits. Federal income taxes are determined annually.

Level 2

Apr 11, 2021 6:26:24 PM

Thanks for your response @MaryK4.

How can I make sure that I am not getting taxed twice for my investments in this partnership? i.e. once when the distributions were paid out in W2 and once when I upload my schedule K1 form in my returns?

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Why do I owe additional Federal and State tax if my Schedule K-1 distributions had taxes withheld