A client who lives in New Mexico sold property in Idaho. It was land used as a farm. After moving to NM, he was no longer farming so he sold it. He lived in NM all of 2021. Property was sold in 2021. I thought everything was fine, but NM sent him a letter stating that we can't use the deduction for taxes paid for another state because:
“PIT-1 line 20, Credit for taxes paid to another state disallowed/adjusted. The income should be allocated on schedule PIT-B.”
“PIT-1 line 20. A credit is not allowed for tax on income that is not required to be allocated to NM on schedule PIT-B 1, 2, 3, and 7.”
I don't do a lot of NM returns, but I can NOT get the software to let me do anything with PIT-B. I've downloaded the instructions, but I am missing something. Why wouldn't the full amount from the sale of that property be on the NM return? How can I get the software to treat it the way NM wants it treated? I know I can just have my client send in the extra money, but I want to learn for any potential next time.
Thank you!
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