PTE Tax

[garman22]

Has anyone worked on the PTE tax for pass through entities?

My question is how is it deducted on 1120S? My thought is its deducted as part of paid taxes/licenses and then added back to state to arrive at the proper state income tax. 

                                                 -OR-

Is it a k-1 item? 

Thanks for any insight provided. 

[dascpa]

We have it in MD.  Last year got new forms in early March.  Then state said don't file them.  Got revised forms in June, then state said calculations were wrong.  Then state finally got it corrected in early August. Good law, difficult to reconcile with forms and nonresidents.

Bottom line, yes, you deduct it on 1120S or 1065 as state taxes in the Smart worksheet.  How the 20+ states do the next step is up to the state.  Will it just be a K-1 notation for the state individual return, will it be an individual line (we have a whole new section on the MD K-1), will it be an addback on the state 1120S form, and then how will it be handled on the individual return.  Finally, what happens to overpayments on the PTE on the corporate/partnership returns.  Again, good law, difficult to implement.  And each state will handle it differently.

[garman22]

@dascpa Thanks so much for responding. I was scouring yesterday and could not "really" find any definitive answers. My thought was also through taxes/licenses. But I read "or thought" that it would be a K-1 adjustment. That really did not make much sense but then again it is congress/IRS. Deducting it through the taxes/licenses make so much more sense and yes, I agree that each state will handle it their own way. I am from Illinois and our governor passed in 08/21 the PTE.

Thanks again!!

[IRonMaN]

It will be a "K-1" adjustment but on the state version of the K-1.