ProConnect HelpIntuit HelpIntuit

California PTE tax in a partnership in ProConnect

SOLVEDby Intuit4Updated July 13, 2022

California A.B. 150, also known as the Pass-Through Entity Elective tax or PTET, allows state tax on passthrough income to be paid at the entity level at a flat rate of 9.3%. The law is effective for tax years beginning on or after January 1, 2021, and before January 1, 2026.

Follow these steps to make the election:

For all qualifying partners -

  1. From State & Local, under Miscellaneous Information, go to California Miscellaneous Information.
  2. Check the box labeled Every qualified partner wants to elect to file PTE tax calculation (3804).

Note: If this is a large partnership and most qualifying members want to elect in, you can check this box then elect out at the partner level for those who don’t want to participate.

To elect in or out for certain partners -

  1. From Schedule K-1, go to Schedule K-1 Miscellaneous and select the partner.
  2. Scroll down to the California Miscellaneous section.
  3. Enter a 1 or 2 in Qualified taxpayer is electing to have tax paid by partnership.

When you make the election:

The program will generate form 3804, Pass-Through Entity Elective Tax Calculation. Part II of the form lists each qualifying partner who elected in, along with their pro-rata share of income, and calculated PTE tax. 

  • The program uses your entries on Partner Information to exclude partners who don’t qualify (SMLLCs and exempt organizations).
  • You can override a partner’s pro-rata share of income on Partner Miscellaneous Info.
  • The total from form 3804 flows to form 565, line 25, or form 568, line 4.
  • The amount of credit calculated for each partner will flow to their CA K-1, line 15f.

To make or record PTE payments:

Amounts you already paid - or indicate you’re going to pay outside of the return with a 3893 voucher or WebPay - will be included as an “Amount paid with form FTB 3893” (form 565, line 30; or form 568, line 9). This prevents them from affecting the bottom line of the tax return. 

If you have the return set for direct debit of balance due on Screen 3, Miscellaneous Information, any unpaid PTE tax will be left off the “Amount paid with form FTB 3893” line. This allows it to flow to the total amount due (form 565, line 38; or form 568, line 16), so you can pay it with the filing of the tax return.

Filing Instructions or client letter paragraphs will generate for any separately filed payment vouchers. Always double check the e-file Instructions and e-file Payment Records Lacerte generates to be sure how much you’re paying with a direct debit return.

To enter PTE tax already paid:

  1. From State & Local, under Miscellaneous Information, go to California Miscellaneous Information.
  2. Scroll down to the Pass-Through Entity Elective Tax Payment Voucher(s) subsection.
  3. Enter the amount of Pre-payment already made for PTE.

The amount already paid will be included on the “Amount paid” line, and reduce the 3893 (PMT) voucher amount, if applicable. 

If a partial payment was made, and your client is going to pay the amount due for this return with direct debit:

  • only the partial payment will flow to "Amount paid with form FTB 3893";
  • the remainder of PTE tax owed will be included in the total amount due (form 565, line 38; or form 568, line 16) and paid when the return is e-filed; and
  • no 3893 (PMT) will print.

If a partial payment was made, and your client isn’t paying the amount due on the return by direct debit:

  • the full amount of PTE tax will print on the “Amount paid with form FTB 3893” line (form 565, line 30; or form 568, line 9); and
  • the 3893 (PMT) will print, showing only the amount of PTE tax not previously paid.

State tax accrual

At this time, Lacerte can’t automatically accrue PTE taxes in the partnership module.

If you normally use accrual option 1:

  1. Make note of the PTE tax calculated on form 3804.
  2. From State & Local, under Miscellaneous Information, go to California Miscellaneous Information.
  3. Scroll down to the Limited Partnership Tax/LLC Annual Tax/Administrative Adjustment Tax section.
  4. Delete your entry in Form 565/Form 568 $800 tax: 1=option 1, 2=option 2.
  5. From Ordinary Income, go to Deductions.
  6. Enter any taxes attributed to ordinary income, including PTE, in State tax.
  1. From Schedule K, go to Rental Real Estate.
  2. Enter the amount in Taxes on the appropriate property.
  3. Scroll down to the State Amounts section.
  4. Enter a -1 in Taxes* to set the deduction to $0 on the state return only.

These entries will allow a deduction for CA taxes paid on the federal return without reducing California income by the same amount.

If you want to allocate the federal deduction to only some partners:

  1. Select the Special Allocations tab above the return workspace.
  2. Allocate the Ordinary Business Income (Loss) and/or Rental Real Estate Net Income to partners according to their share of the deduction for PTE tax paid.

How do extensions affect PTE tax?

If you’re requesting an electronic California extension on the Automatic Extension (7004) screen with direct debit indicated on the Miscellaneous Information screen, the program will transmit electronic payment information for the amount of tax due. If the client has partners elected in for the PTE tax, and no prepayment has been entered, the tax due will include the PTE amount. 

Before you e-file an extension, check:

  • The e-file Payment Record (ext.) and
  • The e-file Instructions (Ext.)

to verify the amount of payment you’re authorizing. 

If you’re paper filing an extension:

  • any regular tax amount due should be paid with the appropriate voucher,
  • the separate 3893 (PMT) voucher will report the amount of PTE tax due, and
  • your client should mail both vouchers with payments by 3/15, or use WebPay.

After you file an extension:

Form 565 filers:

The amount paid with extension will flow to form 565, line 29.

If you don’t have the tax return set up to direct debit the balance due, the program will still assume all PTE tax is paid with the 3893 (PMT), and print the full amount on line 30. An override is available on the California Miscellaneous Information screen, if needed.

Form 568 filers:

If you haven’t made a previous payment, and you file an extension with direct debit enabled:

  1. From State & Local, under Miscellaneous Information, go to California Miscellaneous Information.
  2. Enter the total amount paid with extension in Form 568 2021 FTB 3522 payment [O].

This override is required to show the amount paid on form 568, line 8.

How do I make the election for 2022?

In order to make the election in 2022, your client must pay the greater of $1,000 or one-half of the 2021 PTE tax by June 15, 2022. 

When you make the election in a 2021 return, Lacerte assumes you’ll want to do the same in 2022, and produces the 3893 (ES) voucher. This payment can’t be made electronically through Lacerte.

If you use Filing Instructions, a separate filing instruction will generate for the 3893 that tells your client when and where to file, as well as the option to make payments or schedule them in advance through WebPay. Otherwise, a paragraph in the client letter will tell your client when and where to send the payment. 

On the California Miscellaneous Information screen, you can indicate that the 2021 Payment amount will be paid with Web Pay, or that the 2022 Estimate amount will be paid with Web Pay.

These checkboxes suppress the 3893 (PMT) and 3893 (ES) from printing, and remove the Filing Instructions or client letter paragraph specific to the form. 

Was this helpful?

You must sign in to vote, reply, or post
ProConnect Tax

Sign in for the best experience

Ask questions, get answers, and join our large community of Intuit Accountants users.