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Entering tax-exempt interest on Form 1065 in ProConnect

SOLVEDby IntuitUpdated July 17, 2023

Follow these steps to enter tax-exempt in the Partnership return:

  1. From the Input Return tab, go to Balance Sheet, M-1, M-2  Sch M-1, M-2 (Book-Tax Adj.)  Schedule M-1.
  2. Scroll down to Income Recorded on Books not Included on Schedule K.
  3. Enter any applicable amount(s) in the appropriate field(s)
  4. Go to the Check Return tab.
  5. Click Forms.
  6. Make sure the amounts on the Schedule M-1, Schedule M-3 and the Schedule K/K-1 (line 18) are correct.

A 1065 needs to report Tax Exempt income for a variety of states. Where can I find the appropriate entries?

Tax exempt interest is entered in State Tax-exempt interest (U.S. bonds, T-bills, etc.) on the Schedule M-1 screen and should be sourced to the appropriate State.

Adjustments can be entered in the Adjustments screen. If the Tax-exempt income is coming from a Passthrough it is entered in the Passthrough K-1's screen.

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