Question

Guaranteed payment not transferring to state return correctly

Forum|Forum|3 years ago
February 18, 2023
1 reply
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I have an LLC (form 1065) with 2 partners, with 1 partner receiving a guaranteed payment. When entering in deductions in TurboTax Business I'm allocating by amount all of the payment to 1 partner. The federal schedule K is correct; however, when the payment is transferred to the state return (PA) it's allocating the guaranteed payment to the state schedule PA RK-1 based on the profit percentage instead of the allocation by amount. I don't see where this can be corrected. How can I get the state to correctly allocate the guaranteed payment?

TurboTax Business Windows

AliciaP1

It would be helpful to have a TurboTax ".tax2022" file that is experiencing this issue.

You can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions:

At the top menu in the black line at the top of the page go to Online.

From the menu, select Send Tax File to Agent.
You will see a message explaining what the diagnostic copy is.  Click Send and then you will get a Token number.
Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@Mike860

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M

Mike860Author

The token number is1078738. While I don't think what it's doing is correct for PA, it does have the effect of eliminating the guaranteed payment equally between the partners, because the company net income was reduced by the guaranteed payment, which effected the partners income by the profit split. What the program is doing is putting the PA income for the partners to the point it would be at if the guaranteed payment was never made. At this point I'm not sure which way is correct for PA.

AliciaP1

Your return is reporting the amounts correctly because PA does not treat guaranteed payments the same as federal. PA treats guaranteed payments as a withdrawal proportionately from the capital of all partners regardless of who took the actual guaranteed payments.

@Mike860

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