IN Composite return required when partnership has a loss; penalty from IN.

[hilliardcouple]

Just spoke w/ IN Dept of Revenue after my client was assessed a $500 penalty for not submitting the composite return for the nonresidents. They had a loss so I didn't think the composite return was required however the IN tax code does state that the composite return needs to be submitted for all nonresident partners regardless if they have a profit or loss. Proseries will not populate this form if you have a loss which is an issue. Not sure how to put a request in to the software developers to fix this issue.

[Intuit_Ruben]

@hilliardcouple  Have you already reached out to support ?

[hilliardcouple]

No I didn't see an option to message support directly.

[IRonMaN]

Someone posted the same issue a week or two ago.  They also could not report non-resident partners that had losses even though IN requires them to be listed.

[Just-Lisa-Now-]

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@hilliardcouple wrote:

No I didn't see an option to message support directly.

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you cant message support, you have to call in.

[IntuitMark304]

@hilliardcouple,

I saw your posting about the Schedule Composite for the Indiana partnership filing.  I agree with your assertion that the software does not include non-residents on the composite form when the partner has a distributive loss on Part 4, line 9 of their respective K-1.  The software is following the IT-65 instructions provided by the Indiana at this time. Below is an excerpt from the instructions for the IT-65, on page 18:

 "A partnership will be assessed a penalty of $500 if it fails to file a composite return that includes all nonresident partners. If a partnership has a nonresident partner with a negative distributive share of income after modifications, that partner is not required to be listed. Failure to list such partners will not be subject to the $500 penalty."

The verbal communication with the agency seems to be not aligned with the instructions.  Did they indicate what they expected to see in the filing?  A blank Schedule Composite?  Did they want a the composite checkbox completed on page 1, line E of the IT-65?  

Any more details would be helpful to help us investigate the issue.  Thanks.  

[hilliardcouple]

I have received 2 separate notices on this issue as of today. When I called IN, they said that on the form IT-65 line F if it shows nonresident partners greater than 0 then a composite return or PTET return is required even if no income. They wanted me to send them the Composite Schedule with the same number of nonresident partners listed under line F with the their share of the loss listed under Column C. The software won't generate that with a loss so I downloaded the form from the IN website and filled out manually and submitted.

Under E on page 1, they wanted the composite return checked.

[hilliardcouple]

I just pulled up the instruction for IT-65 for 2024 and on page 18 and they have updated that verbiage. It now says:

A partnership will be assessed a penalty of $500 if it fails to file
a composite return that includes all nonresident partners. If a
partnership has a nonresident partner with a negative distributive
share of income after modifications, that partner is required to be
listed.

So at some point IN updated the instructions to require the composite return across the board.

[IntuitMark304]

I agree with what you are seeing here @hilliardcouple.  I will work with the development team to get this resolved as soon as possible.  

[sjrcpa]

Will Intuit work with IN to get penalties abated? @IntuitMark304