Taxpayer was a part year resident of California and a part year resident of Illinois. He has a tax liability to California on a share of income sourced and taxed in Illinois. The income that is being taxed twice by California is business income and schedule K-1 from a partnership. ProSeries Professional is not automatically calculating Schedule S in the 540NR California tax return when I selected to add a California State tax return. I manually added the schedule S to the California return, but it is not calculating any amounts on columns b or d for the double taxed income by California and the double income taxable by other state. What do we need to do in proseries to have the program calculate the Schedule S for California?
Thank you very much!
No credit on part year returns. You allocate the income to the correct state, there shouldn't be any double taxation.
Use the part year state allocation worksheet at the bottom of the federal information worksheet.
It would help to have a clear picture of what happened here, but I'll imagine that California residents had income from an Illinois business and/or real estate rental even before they moved to Illinois. While they lived in California, they had to pay tax there on that income. So they qualify for Schedule S -- as that form's instructions state,
"California part-year residents:
- Follow the instructions for residents for the part of the year that you were a California resident."
And the credit can be shown on Line 58 or Line 59 of the 540NR. If the software doesn't compute it automatically, you won't be the first preparer who has had to do it manually.
Or did the Illinois income not start, until they left California? Then don't show it on the California return in the first place.
Thank you Bob. This is the situation, client was a resident of Illinois, he moved to California on 7/1/2020. All 2020 income was sourced in Illinois. But, client is subject to California state income tax for the income he received from all sources while he was a resident of California. All his income was earned in Illinois. Schedule S states that a taxpayer is taxed in another state on the same income, he is entitled to a tax credit for the tax paid to that other state on the same income.
However, Proseries is not computing the schedule S. How do I make proseries calculate the schedule S automatically? Can you please help me?
Thank you so much!!
My first guess was that he had moved from IL to CA, but then something you said about opening the CA return after IL made me think he went in the opposite direction, which I admit isn't a reasonable conclusion. There may be some hidden box that you have to check on a CA worksheet, but it may be that the program can't deal with that situation. With only a week remaining, the easiest solution may be to complete the Schedule S the old-fashioned way.
I use Lacerte, which has a Sch S Screen that the user can fill in to generate Sch S.
Screen 52 Other State Tax Credit.
In Lacerte, the tax credit would NOT be generated automatically based on the Wages and K-1 input for a client with your Part-Year fact pattern. It has to be generated using the above screen with additional (e.g. double-taxed) info.
Does Proseries have a similar screen?
One thing you may need to consider - is the move temporary?
There are special COVID rules on telecomuting for CA. Just in case.