I am preparing an estate form 1041 and do not want to take a deduction for state taxes. I go to screen 12 and put in 1 in the "Do not deduct state tax payments on federal return" and it does not do anything.
Client does not want to take the deduction as he wants return finalized and done with. If he takes it will be a taxable event in 2020.
Don't see any other overrides in the program.
It's late Friday afternoon and it has been a long week, but I can't visualize what taxes you would be deducting that would result in a taxable event. Were these withheld taxes, and you expect a refund? Maybe an override and find out if the e-File Police let you through anyway.
@Accountant-Man "DON'T PUT IT ON THE RETURN, AND IT WON'T BE DEDUCTED."
But she wants to put it on the state return because she wants real money back from the state.
I'm thinking this is something like a 1099R annuity payout of $10,000 with $500 state income tax withheld. (Why did they ask for withholding? Who knows.) The taxable income turns out to be zero, after other deductions.
It's all a part of the e-File game -- it's not what you know about tax law, it's what you know about data entry. File the federal return first, without the deduction, then input the withholding and file the state return? Maybe one or both should be a paper return. Guess what: it's not the end of the world as we know it.
"Quarantine should be two weeks. A fortnight is not long enough."
Putting it as a deduction on federal form 1041 does NOT put it on the State as a payment. Is that what you want? It has to go on the state return as a payment to the state, so if the state income creates a tax smaller than the payment, it will be refunded.
@Accountant-Man "Putting it as a deduction on federal form 1041 does NOT put it on the State as a payment."
But I think her problem is that entering state withholding from the 1099R, so that it shows up on the state return and therefore gets refunded, also automatically puts it as a deduction on the Form 1041. I haven't tried it, but that's how it works with the 1040, right? It shows up on Schedule A?
Here is what that entry does:
1 = Do Not Deduct State Tax Payments on Federal Return
|2019 Estimated Tax||Screen 12; Code 36|
Enter ‘1’ if the state estimated tax payments or extension payments should not be included on the federal return as a current year deduction.
Maybe you have some other payment you need to negate.
I just played around with this and it appears that the 1 on the Estimated taxes screen ONLY applies to preventing the estimated taxes from being deducted. It had no effect on the state tax withheld that I added to the 1099-R (for the sake of the test.)
No place that I found to input a -1 to prevent a deduction.
My suggestion: if this is the final year, deduct the state taxes & move on. Tell the client to let you know if they receive a notice from the IRS.
Deducting the tax will reduce the taxable income on the K-1. You could add a universal supplemental stmt on the K-1 telling the benes that they should each report $XXX amount of state tax refund on their 2020 federal tax return. They are the ones who ultimately get the refund, so only fair that they should report it.