State tax attributed to SE income

[ranthony]

I had the IRS change my 2016 1040 (MINE - not a client's) for the state tax that I deduct from my schedule C, but they didn't change that part.  I add a line to my Schedule A to add it back to income so that my Schedule A reflects only that which is personal.  The IRS took that line off of my Schedule A and then added a Miscellaneous Income line to my 1040 for that amount.  There is no net change to my federal return, but my state hit me with a bill. Even though I add that back into my state income since state tax isn't deductible on my state return.

How is this normally entered on the return and does Proseries Basic have a way to enter it?  I don't see anything on the tax payments schedule where I can adjust what is deducted on the Schedule A.

I'm concerned because I've done this for years and not just for myself - for several clients.  I haven't had any of them com back yet, but it's probably only a matter of time...  ???

[Just-Lisa-Now-]

What kind of state tax are you deducting on Sch C?  Im confused.

[ranthony]

State income tax

[IRonMaN · Accepted solution]

You can't deduct state income taxes from a schedule C.  I'm not sure exactly what happened with your return, but you really want to stop taking that deduction.

[Just-Lisa-Now- · Accepted solution]

State income tax paid is a Sch A deduction then the following year any state refund becomes income on that years return.....you need to get Sch C out of the mix.