Multistate K1 on individual return

[EmsBTW2016]

Hi all,

Second question of the day.

I have a client with a multistate k1.

Home state is Alabama, K1 is for NC. I cannot get the income to flow to Federal and North Carolina without also flowing to Alabama.

I need the federal to show income, Alabama to show zero, NC to show income. Ive looked at the following article:

https://proconnect.intuit.com/community/help-articles/help/sourcing-income-for-a-multi-state-passthr...

I have tried its suggestions, I have tried using the N and S drop downs, I have tried every combination.

If AL shows zero, then so does Federal. If NC shows income, then AL and Fed are both zero. What I need is for NC to show income, Fed to show income, and AL to show zero for the particular amounts.

Thanks so much I hope this makes sense

[sjrcpa · Accepted solution]

An AL resident is taxed on all of their income. Why do you think AL should show zero?

Client will get a credit on AL return for tax paid to NC.

[EmsBTW2016]

Okay well that makes sense to me and thank you for explaining! This is for a 2018 return that I am recreating in Proconnect - I am recreating this clients 2018 return in Proconnect based on what was done on the prior year return which I did not sign but was the preparer on - changes were also made by reviewer and never communicated to me. It seems it was incorrect since the AL return does not show this k1 income (it is small - less than $100). I will inform my client and see what they would like to do. Amending would be ok with me - any other options?

I thought this would help me learn the software and also be able to roll forward to 2019. The 2019 return is the one I am going to prepare completely on my own.

The 2018 return is the one that is not picking up the k1 long term cap gain income on the Alabama return.

[EmsBTW2016]

I will also add that they do not pay tax to NC because they have an overall loss. The ordinary loss is a few thousand and the long term cap gain is less than $100. That could be why the prior year reviewer did not include the long term cap gain from the k1 on the Alabama return? Since there is no NC tax paid and therefore not a credit to go on the AL return.

[sjrcpa]

For $100 income I would not amend the return. Explain what happened to the client. Tell them if they get a notice from AL to pay it, and that you will reimburse them for xxxx (interest, penalty, whatever your policy is for when you make a mistake).

YMMV

[EmsBTW2016]

Thank you!

Now I actually have an additional question if you don't mind. This 2018 return is not showing the ordinary loss from the K1 on the Alabama return. In proconnect - it IS showing the loss. The way it was filed, the loss was not included on Alabama. The loss was also not included on Federal since it is passive and there was no passive income to offset.

My question - should the ordinary loss have been included on the Alabama return if it was not allowed on Federal? I would think not - but I am not sure how to fix this in the proconnect software.

Thanks again - like I said this 2018 return was changed during the review process and I trusted my reviewers, so I want to make sure I know the correct way to file, and of course inform clients of any errors.

[sjrcpa]

I do not do many AL returns. Most states follow federal. Check the AL instructions.