Multiple State K1s

[msindc1]

Folks:

When entering a K1, the state for the K1 is set to the state where the partnership or LLC is based, right?  And sometimes there will be a state K1 which includes adjustments for the state.

But what do we do if the same K1 is reportable as to more than one state?

For example, Ace LLC is based in CA and there are CA, NY, and PA K1s--all reporting the exact same info.

Micah

[PhoebeRoberts · Accepted solution]

For a 1040, it depends on the taxpayer's resident state. Oklahoma, for instance, starts by taxing everything and allows a manual adjustment for out of state income or loss in Screen 51. Then for the non-resident states, I use the State Source Amount column to pick up the state-source income for each state. For some states (like Utah), you can lump everything into Line 1. For some states (like North Dakota), you have to identify the state-source portion of each line item in order to get the right presentation on the ND non-resident return.

California is the state most notorious for having adjustments, which would go in the State if Different column. Adjustments are for items where federal tax treatment differs from state tax treatment. They are not the same as income being sourced to a given state.

If you have CA, NY, and PA K-1s all reporting the exact same info, I suspect your K-1 is from an investment partnership, and the state-level sourcing is determined by the taxpayer's residence. Reading state K-1s is a learned skill, and does not lend itself to plunking numbers into Lacerte and hoping the right answer falls out. It takes a while (and reading the state instructions) to acquire that skill, and if you have access to a more experienced preparer who can work with you in person, that's often the quickest way to pick it up. But once you're familiar with them, it's easier to identify the couple of numbers that actually apply to your client. (For instance, I've seen enough PA K-1s to know that there are two of them, one for residents and one for non-residents, and I only care about the NRK-1. And I only care about specific lines on that one. And every year stands alone for PA, because it is the worst, so all your losses are effectively lost, and all your income is taxed!)

If you post some redacted pictures of your specific K-1, I don't mind helping you read it, but my eyesight isn't good enough to see your desk from mine.

[msindc1]

This is incredibly helpful.  I am going to give it a try using this information -- and I will let you know if I still need help.  THANKS!