Fixing the ID S Corp return to handle Part year Residents

[Continuouslearner]

I had a ID S-Corp return in which the taxpayer as sole shareholder and his S-Corp business moved from TX to ID in the middle of the year and Lacerte was unable to handle a part year resident return. I spoke to representatives at the ID tax department who indicated that to handle the part year situation we needed to use the allocation method instead of the apportionment method since no income was being taxed in two states at the same time as the taxpayer had no ID income prior to moving. The ID Tax department representative gave me specific line by line instructions on how to handle the circumstance, one of which was to show nothing on the ID K-1 Part IV Column B for ID apportioned items since apportionment didn't apply, and Lacerte was unable to handle this since the taxpayer was listed as an ID resident. 

Lacerte's only suggestion to fix the issue of the program incorrectly using apportionment for the taxpayer that was listed as a resident was to call them a non-resident, which incorrectly assessed withholding to be made by the S-Corp as it appears non-residents must have their tax paid by the S-Corp via withholding. There is an option to override the withholding in Lacerte, but the fact that the taxpayer is not listed as a resident would generate ID review questions on the missing withholding. However, even if overriding the withholding in Lacerte, there is no option to uncheck the box on the K-1 identifying that it had passthrough withholding, which again will generate ID and maybe taxpayer questions.

My suggestion is to include a check box for part year residents like our client so that the apportionment factor is not considered as the ID tax representatives indicated similar to the way Lacerte handles the program when the taxpayer is a non-resident, but not to force the program to withhold taxes since the shareholder will be filing his own ID personal tax return.  Since ID does not have a check box to indicate part-year residency, it is best to list the taxpayer as a resident since they resided there the last half of the year.

In addition, Lacerte's program does not allow you to update the state's fiscal year in this situation as the start of the ID year (roughly June 15, 2023) does not coincide with the federal return because the entity federally started the year on January 1, 2023. So, I am suggesting an option to modify the start date of the year for the state returns in this situation.