Client is a partner in a partnership that has elected into the NYS PTE.  The partnership pays NY tax at the entity level.  That has two impacts on the partner:  1) His K-1 Federal income is reduced by the amount of state tax paid at the partnership level.  2) He receives a PTE credit toward his NY state taxes for the amount of state tax paid at the partnership level.  All good.

In Proseries 2023, the Carryover worksheet is treating the credit on his 2022 NYS return as if it was a payment made with the return filing.  This adds to state taxes paid in 2023 on his Schedule A which doesn't seem right (he didn't pay the tax, the entity did and his K-1 income has already been reduced by it).  It doesn't matter to the 2023 result due to the SALT cap, but it really messes up the State & Local Income Tax Refund Worksheet that's used to determine if any 2022 state refunds are taxable.  

Has anyone else noticed this?  The PTE credits are so complicated that getting someone to even understand what I'm talking about is an issue.  I think this is flying under the radar b/c the IRS hasn't adjusted the State & Local Income Tax Refund Worksheet in the 1040 instructions to handle refunds caused by PTE credits and Proseries is mishandling the PTE credit as a payment by the individual at the state level.