Sourcing income for a multi-state passthrough K-1 in Lacerte

This article will help you understand when, and how to use the different sourcing options available on the K-1 in Lacerte.

For more Schedule K-1 resources, check out our Tax topics page for Schedule K-1 where you'll find answers to the most commonly asked questions.

Sourcing the Federal Amount column

When entering a multi-state K-1, you always want to start with the federal amount. Use this column when amounts need to flow to the federal return and the resident state return.

Use CTRL+E to open the source box on the Federal Amount column. From here you can use code N and code S to show Lacerte how to source the amounts.

• Use code N to tell Lacerte to report this amount on the federal return. This will still flow to state returns that start the return on federal amounts.
• Use code S to tell Lacerte to report this amount directly on the state return, bypassing the federal return.
• To remove an N or S code, select in the N/S field and choose the blank option at the top of the list.

Using the State, if Different column:

This column should only be used when there's a tax law difference between federal and state(s). This will create an adjustment on the state return, for example, ordinary income is different between federal and state due to different Section 179 limitations. This column is most commonly used for the resident state when working with a multi-state return.

State Source Amount:

This column is used for entering state-specific amounts for nonresident states.

Other state inputs:

In addition to the State, if Different and State Source Amount columns, several states include additional input fields or sections. Typically these fields can be found in the Part III (Lines 1-10) section, or in a separate section specific to the state.