Maryland Schedule K -1 Error Message Section D Line 2

[dsocpa]

The PTE tax was recorded on federal schedule K-1, line 12 code S.  2 sharesholders 51%/49%.  The tax on respective shareholder's MD k-1's should populate correct?  Regardless, if I try to enter the amount on the 511 K-1 on the Maryland S corp return section D line 2 (total PTE tax paid)  I get an error message on the MD form 511 sch K-1 substitute the amount is incorrect - which apparently is why the return will not efile.  In turn this is creating an issue with the clients 1040 and 502 as well.  The amounts are correct, the S-Corp paid PTE tax for 51% shareholder of $510 the 49% shareholder $490.  The total on the Schedule K worksheet in the MD file should be on line 2 of section D as the total $1000, however, Proseries won't even let me enter $1000 on that line.  Not sure what I'm doing wrong.  A search of this issue hasn't turned up any similar issue with the form 511, however, I note there are still several issues with this form and the PTE reporting in general.

[dsocpa]

Below is the exact error message I am receiving:

Sch K Wks: Sec D, Line 2 The total of all members income on Schedule K-1, Section D, line
2, $1000. doesn't agree with the amount on line 2, Section D of the Schedule K Equivalent
Worksheet. This is due to rounding. Please adjust the member's Schedule K-1 to correct
the discrepancies. If you are filing electronically, your return may be rejected if this
amount is not adjusted

[IntuitMark304]

For S corporations, Proseries takes the amounts calculated on page 1 of the Form 511 on lines 7, 9 and 13c. totals them and enters them on the Sch K Equiv Worksheet in Section D, line 2.  

The software them allocates the PTE tax amount to the shareholders based on their ownership %.  Sometimes due to rounding, the amounts distributed to the K-1s will not exactly sum to the amount on the Sch. K Equiv Worksheet, so the user will have to adjust the amounts on the respective K-1s.  

One quick comment/question - I am confused by your statement that you are reporting the PTE tax on line 12, code S of the Federal K-1.  Can you explain more why you are deducting it as a flow thru deduction to the shareholder?    

[dsocpa]

Thank you Mark304.  The error message is actually correct.  The real issue is how to fix it.  I tried overriding the amount on line 2 of the form 511.  I'm $2 off, and that is preventing efiling the return.  Any ideas?

Line 12 code S of the federal k-1 of the individual return is for "Other deductions".  line 3 is for state tax withheld.

[dsocpa]

I've not seen a response to my earlier query.  Where do I enter the PTE tax filed on form 510D during 2021?  When I try to efile the form 510PTE I get an error message and the form 510 populates with an error. 

Attempting to file the form 502 where is the PTE reported?  So confused......

[dsocpa]

Actually, looking at your attachment I see part of the problem.  The issue is there is a loss form 511 line 6 so 0 on line 7.

[IntuitMark304]

If estimated taxes for the PTE filing were made in 2021, then enter those payments on the Information Worksheet in Part III.  The payment will then flow to line 13a of the Form 511.

As for the rounding issue, you are able to edit the pass through entity election tax paid for each member on their respective K-1.  Go to each MD K-1, Part D, line 2 and you are able to edit these amounts to equal the total PTE tax shown on the the Sch K Wks, Part D, line 2.  

[IntuitMark304]

Additionally, you may want to do additional research on where to deduct the PTE taxes by the entity.  My understanding of why the states are creating these PTE filings, is to allow owners of pass-through entities the ability to pay the state level tax of the pass-thru at the ENTITY level.  

That way they can get the federal tax deduction for those state taxes at the entity level.  By putting the PTE tax deduction on line 12, code S of the Schedule K on the 1120S, you are effectively passing that tax deduction thru to the shareholder where it may be limited on Schedule A by the $10,000 cap.  That is the issue the PTE tax election was created to avoid.  

I have seen taxpayers taking these deduction on page 1 of the 1120S on line 12 as state taxes. 

[dsocpa]

The issue is as follows:

I'm unable to enter any PTE tax on MD K WKS Section D line 2 no matter what I put on the individual shareholders MD K-1 Section D line 2.  The PS error check takes me  to the Sch K wks when I  run the error check.  Whatever cause, this issue is what appears to be preventing me from efiling this return. (please see attached).

In addition,  

The Federal Form 1120S has a loss of $40,002 on line 21 - Schedule K-1's for each respective shareholder line 1 has their % share of the loss - 40,002 * 51% = 20,401,, 40002 * 49% = 19,001.  

The loss flows through to the MD K Wks Section A line 1 as $40,000 which is $2/less than the federal income. The income amount on the Sch K Wks Section A line 1 can not be changed unless overridden.

Estimated payments were entered on the MD Information wks Part III in the amount paid.  The estimated tax Section D line 2 of the MD Sch K wks does not allow me to enter the total estimated tax.  However, for each respective shareholder I can enter their % of the total tax in Section D line 2 but it does not show up on the MD SCH D. 

When I do an error check the system points to line 2 of Section D, which doesn't allow entry of the amount.  Attempting to manually enter the amount it doesn't appear and the line space becomes pink?

I've studied the PTE tax and have had other clients with the tax and had no issue.  Entering the tax as MD state withholding on the federal Schedule K-1 has not been a problem except with this particular return PS now states that the MD return can't be efiled but mailed due to separate MD WH. 

What the heck!  I'm tearing my hair out at this point.  If it weren't for the other returns I've filed successfully I likely just print and mail but now I think there is some issue somewhere in the return that is causing the error/malfunction.

[dsocpa]

The error states Section D line 2 of the Sch K Wks doesn't agree with the total of all members income.

Section D line 2 is where the PTE tax should flow through from the info. wks, not the income.

So confused!

[IntuitMark304]

I think your issue is that this return has an overall loss at the federal and Maryland level.  Which then means no PTE tax is being generated at the state level.  If no PTE tax is calculated, there will  not be a PTE credit to pass thru to your shareholders. 

This is not a withholding tax.   The entity is being taxed at the state level.  The income then flows thru to the shareholder via the K-1.  But then the shareholder receives a credit for any taxes paid at the entity level.  

The entity would be getting a refund for any estimated taxes paid in this scenario.