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lacerte how to report income from a source state with no filing requirement?

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Level 3

I have a US/CO return that also needs to include Arizona losses and QBI info but is not required to file an AZ return . The AZ losses are reported on K-1s and basis info is being tracked. Do I have to REP the AZ return to enter the K-1 information and then just not file the return? Is there another way to enter without having to REP an AZ return so the losses don't mix into CO income reporting?

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Level 15

If your client is a CO resident he reports all his income on the CO return and you can totally skip AZ.


ex-AllStar
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Level 15

Agree with Susan.

CO income tax law has rolling conformity with the IRC but provides for various modification.  How AZ taxes an individual or entity or whether AZ requires the filing of a state tax return is generally irrelevant unless other state tax credit is claimed for purposes of determining sourcing and limitation.

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Still an AllStar
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Level 3

After reviewing, I have decided to leave the REP'd AZ return in the client's tax record for 2019 rather than report the K-1s as CO. I can opt to not file the AZ since it is not required. I decided to do this after looking at the QBI information that nets the AZ losses against the other QBI. I think this better treatment since CO does not conform in all cases to TCJA and Cares. 

If you think is wrong, let me know.

Thank you all for your helpful comments. I appreciate it.

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Level 15

@pat wrote:

After reviewing, I have decided to leave the REP'd AZ return in the client's tax record for 2019 rather than report the K-1s as CO. I can opt to not file the AZ since it is not required. I decided to do this after looking at the QBI information that nets the AZ losses against the other QBI. I think this better treatment since CO does not conform in all cases to TCJA and Cares. 

If you think is wrong, let me know.

Thank you all for your helpful comments. I appreciate it.


For the reasons explained in my previous response, the AZ return does not matter at all to CO.  What CO references is federal treatments and then its own modifications.  What happens on the AZ return that you may otherwise file (or not) makes no difference at all as far as CO is concerned since you're not claiming a credit for AZ tax paid.

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Still an AllStar