Alabama Form 1041- Problem with Ordinary Deductions, Line 11, page 3 of Form 1041

[mm1]

Page 3, Ordinary Deductions, Taxes Line 11,

You enter the Alabama amount in the 4th column and in this case, Alabama does not allow the deduction for State income taxes paid on behalf of the decedent. When I enter a Zero (0) in the 4th column, it does not put the Alabama amount as zero in the 3rd column and doesn't put the adjustment amount in the 2nd column as it has in the past. Both the 2nd and 3rd columns cannot be input. In order to file this return I had to resort to overriding the 2nd column to show the adjustment and the 3rd column to show the Alabama amount of zero allowable.

[JH6]

How line 11 column C is calculated depends on the residency of the estate. If it is a non resident estate, column C pulls from column D. Otherwise, it pulls from Tax-Exempt Alloc worksheet, line 11, column e which pulls from fed Form 1041 the total of line 19 and line 24. Hope this helps. 

[mm1]

If I enter a zero in the 4th column to the right, which indicates that Alabama does not allow those taxes or does not allow the full amount shown on the Federal return, it should place a negative adjustment amount in the the 2nd column for adjustments and reflect the Alabama allowable amount in the 3rd column on Form 1041. The 4th column doesn't appear on the actual Form 41 return in Alabama. It is used, or was in all the past years, to reflect adjustments to the Alabama 41 amounts between federal and state.

It is not doing that now. There is no way on the schedule to show an adjustment to taxes and the correct allowable amount of the Alabama deduction for taxes. I have to override the adjustment calculation and the allowable Alabama amount for the Alabama Fiduciary return to be correct. Can I e-file with the overrides? I don't know yet as the client hasn't come in.

This is absolutely a big issue on the State of Alabama Form 41 as many fiduciaries have to file and pay the final personal returns for a decedent and while the Federal allows the deduction of the State income taxes paid on Form 1041, Alabama does not allow a deduction for State Income taxes paid to Alabama.

This needs to be fixed. 

[mm1]

There is no tax-exempt income here on this return. It is a simple matter of an Alabama Estate of an Alabama decedent. Very simple return. The fiduciary paid $104 in State income taxes for the decedent's final state return. It is deductible on the Federal 1041. It is not deductible on the Alabama 41 return. What column on the tax exempt worksheet do you suggest I enter this and why should I have to go to that tax exempt schedule if there is nothing tax exempt on this return? 

[JH6]

Form 41 Sch C line 11 Column C is now updated to allow user to adjust tax deductible to AL without making an override. Since the program cannot identify what portion of tax deduction entered on Fed Form 1041 is deductible to AL, the whole amount of Form 1041, line 11 with adjustment still transferred from Fed. But now users are able to manually adjust column C for AL without making an override. Column B is calculated for the difference of column A and C. Thank you for reporting the issue. A newer version of product should be available by end of 3/4. 

[mm1 · Accepted solution]

Thank you!