With the changes to the Form 1065 8825, what is the Lacerte workaround to input state income taxes on the 8825?

[radio4]

On the 2025 1065 Form 8825, the line for "Taxes" has changed to "Real Estate Taxes". Prior to 2025, I was including the property taxes, California LLC Tax, and any California PTE Tax on the "Taxes" line and then using the "State Amounts (if different)" to remove the California state taxes from the California 8825. Then on the M-1, I would enter the CA LLC Tax + CA PTE Tax on the line "State Tax" under non-deductible expenses. I would be in balance for both Fed and State.

Now with the changes to the 8825, I'm trying to find a workaround since I no longer feel comfortable entering the State taxes on the "Real Estate Taxes" line. If I enter the state income taxes on the line "Other expenses", how can I properly remove the expense on the California 8825? I do not want to enter the expense as an ordinary deduction on Page 1 of the 1065 and I'd like to avoid using Line 13e to separately state the income tax deduction.

I know it's still very early in the year, but it would be great if Lacerte can reorganize the 8825 input and include a separate line for "Taxes" and "Real Estate Taxes" on the 8825 input and then we can continue to use the State Amount (if different) box to remove the state income tax from the California 8825.

[bwcpa]

I just got the latest version of lacerte downloaded from Lacerte and, shockingly, this still hasn't been fixed.  Not sure why this is so difficult to fix.  Easiest thing for Lacerte to do is just use last year's (ie 2024) program coding which actually worked.

[Kathi_at_Intuit]

Hi @radio4 Nice to see you in the Community and thanks for posting about the 1065 8825. Development is looking into this and for now, the other taxes can be entered under "Other expenses".

[bwcpa]

Hi Kathi@intuit.

thanks for replying regarding the 8825 problem, but entering taxes into "other expenses" won't solve the problem because the "other expenses" section of the program doesn't contain a "state if different" field.  So, without a "state if different" field for taxes, we can't finish the tax returns (for any state tax return).

Please have Lacerte's Development Team address this asap.

thank you, 

[Kathi_at_Intuit]

Hi @bwcpa Thanks for the reply and feedback. We have given it to development for review. 

[radio4]

Hi @Kathi_at_Intuit , thank you for forwarding this State issue to the development team. 

[Neil Gulati]

I am happy to note that the Development tear is looking into this issue. Please find the solution asap as we are getting into filing these returns very soon.

This issue relates to both the Partnerships and S. Corp. returns.

[pmfcpa00]

It's no longer early in the season as we have four partnerships with rentals ready to go, but we cannot file and include the state taxes in real estate taxes.  That does not make sense, but that is where you have to put it if you want a State if different adjustment.   Why the change and when is this going to be corrected.

[bwcpa]

Awfully slow development team at Lacerte this year.  I wonder if UltraTax can get it right.

[Neil Gulati]

Hi Kathy:

Would like to know if there is going to be a fix or not for this issue or not as in light of filing season already started. At lease give us an update on this from the Development team.

[Kathi_at_Intuit]

Hello! Thanks for your feedback. We apprecaite you taking the time to share it with us. We’ve shared the concerns with our development team. There’s no update yet, but this is under review. We’ll follow up on this post when we have one.

Thanks for your patience. 

[bwcpa]

Kathi@intuit:

It's been two weeks since this issue was first raised with still no fix in sight.  I am wondering how much patience Lacerte customers are expected to have, after spending large amounts of money for the software annually.  As many have pointed out, we are no longer in early tax season.  This seems like a fairly simple fix, why is it taking so long?  

The alternative that Lacerte users have, until this is fixed, is to classify all types of taxes as "real estate taxes", in order to get the "state, if different" treatment that is needed to have an accurate state income tax return.  In some cases, we have hundreds of thousands of dollars of pass thru entity taxes incorrectly classified as "Real estate taxes" in the Lacerte program, due to a lack of foresight on the part of the development team, and a lack of caring or urgency in fixing it.   Please forward that message to your development team as well.

[Jeff92614]

I would just use the "other expenses" section at the bottom of the 8825 input screen to enter the state taxes.  Then in the M-1 screen you will enter the state tax adjustment like you normally do.  Everything will balance.

Jeff Heimler, CPA

[bwcpa]

No, we tried that already, and you'll notice that if you do that, your California Schedule M-1 will have the wrong number for income per books. (it will be off by the amount of California non deductible PTE taxes).

Also, California requires their own version of the Form 8825, using California law amounts, and if you put the pte taxes in "other expenses" the program will incorrectly deduct the PTE taxes on the California 8825, which is definitely wrong.

[Neil Gulati]

Fully Agree with bwcpa. The fix will require a line item for State Taxes, similar to the line provided  for State Taxes in the Page 1, 1065 deductions (Ordinary Business income and expenses).

[Jeff92614]

Thanks BW and Neil.  I agree with your comments.  My apologies for the advice as I did not fully realize the ramifications. 

[abctax55]

And the fix needs to come soon.... tomorrow's update would be great 😉

Given Lacerte's (usually) focus & awareness CA's issues, I'm surprised they have dropped the ball on this one.

[bwcpa]

Well, unfortunately, we just got the Lacerte update a few minutes ago, and this problem still has not yet been fixed.  Very disappointing.

[Neil Gulati · Accepted solution]

Lacerte has got a Fix for Partnership returns now. Thanks.

Hope a fix is coming soon for S. Corp. returns as well.

[Kathi_at_Intuit]

Hi @Neil Gulati thanks for confirming that this is fixed for the 1065. It will be coming in the near future for Scorps!

[Neil Gulati]

Thanks for confirming that S. Corp fix will be coming soon, Kathy.

[Steven N]

I also have contacted Lacerte about this. To work around it I use Schedule K line 22, Other Schedule K Items.  Under "Deductions" on the last line it lets you put in numbers for federal and state only.  I use code ZZ and put in the both the FTB and the Pass Thru Entity taxes there so they are only deducted on the federal return.  The drawback is that it is it puts it on  Line 13 on the K-1.  You could flip this and deduct it on both and add it back for state purposes under miscellaneous deductions .  I do not think this is actually a Lacerte issue.  I think it's the way the 8825 was designed.

[bwcpa]

Actually, Lacerte fixed this problem on the partnership module with the update that came out last Wednesday.  They've added a new line underneath the "real estate taxes" line on Screen #17, called "other taxes", and you input your state tax and PTE tax there.  Then, down at the bottom of the page  you can input the "state if different amount" and you should be good to go.

It doesn't look like the S corp module has been fixed for this yet, though.

[Steven N]

Sorry, but this still is not a real fix as it puts the amount on line 13 of the actual K-1 and still does not include it with the amount from the 8825.

[kile]

If I enter real estate taxes on the real estate tax line on the 8825 it doesn't flow to the Pa Schdule E.  It shows it as out of state source loss? 

[IntuitKatie]

Hi @kile 

Thanks for being here on the Community! If this is still an issue we would recommend contacting Lacerte Support for further assistance.

[Neil Gulati]

Hi Katie

Just FYI, I still haven't see the fix on the S. Corp. return module. Hope it comes soon with this week's update.

[Kathi_at_Intuit]

Hi @Neil Gulati Thanks for letting us know. We were told it is coming soon, however not given an exact date. Hopefully in the next update!

[bwcpa]

Kathi,

When is the next update being sent?  Normally we get the weekly updates on Wednesday afternoon, but we didn't receive it this week, nor on Thursday.  What's the cause of the delay and will we get it today, as we have a lot of tax returns waiting for that update in order to complete the tax returns.

[Kathi_at_Intuit]

Hi @bwcpa thanks for reaching out and asking about the update for Lacerte. There is no eta as of yet, and nor do we have any infomration on delays, but we will update the post when we have one.

[Kathi_at_Intuit]

Hi @bwcpa There is an update for Lacerte that has been released today. The software version is 46.0205. 

[kile]

Update did nothing to fix the 8825 real estate tax issue not flowing propertly to the Pa schedule E.

[Neil Gulati]

Hi Kathi:

The today's Update didn't fix the S. Corp issue. Can you find oud when will they fix it?

[Kathi_at_Intuit]

Hi @Neil Gulati Thanks for asking when this will be released. We know it is frustrating not having a definite time frame, however the information that we have at the moment is that it will be in a future release of Lacerte. 

[Neil Gulati]

Hi Kathi:

The S. Corp 8825 fix is NOT in the update received today.

[Kathi_at_Intuit]

@Neil Gulati Thanks for the update! Keep us posted as we know more updates are coming and one of them WILL have it. 

[Neil Gulati]

Thanks Kathi for your response.

Hope the update comes sooner than later as we need to wrap up the S. Corps returns.

[Neil Gulati]

I see the S. Corp fix now with the today's update. Thanks.