Level 4

Question

S Corp - Multi State allocation?

Forum|Forum|1 year ago
December 4, 2024
4 replies
26 views

I have an S Corp that is going to start doing business in another state (DE). He lives in MD. The two states do not have reciprocity.

Obviously his P&L will need to be tracked on a state by state level. Is the income allocated to DE at the S Corp level? I have spent too much time in Proseries trying to figure out how to allocate some of the S Corp income to DE vs MD. I would imagine this must be done at the S Corp level and not at the individual level, correct?

Thanks.

ProSeries Professional

T

Terry53029

Intuit Community Champion

S-Corp is a pass through entity, so it pays no tax on income. You would allocate income from K1 to each state. Some states allow a SALT cap workaround may enable them to indirectly deduct state and local taxes they've paid beyond the $10,000 SALT cap. If you elect that option (if available in your states), then you have to allocate on the 1120S.

B

bryceAuthor

Level 4

Yes, MD has a Pass through entity (PTE) tax that is paid at the S Corp level. How do you elect on the 1120S to allocate the income to MD or another state? That is what I can't figure out.

T

Terry53029

Intuit Community Champion

That would be on the state forms. No allocation on the federal 1120-S. I am not familiar with MD, but I'm sure someone will jump in from MD. When you send the K1's you will need to send instructions to each shareholder the state breakdown of income.

J

jeffmcpa2010

Level 10

"I have an S Corp that is going to start doing business in another state (DE). He lives in MD"

So now we have to deal with "Genders" for S corp's too?

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bryceAuthor

Level 4

Haha. Sorry, should have said "the owner lives in MD"

Appreciate the info from everyone. Sounds like the allocation is handled on the state corporate returns. I'll begin looking into it.

J

jeffmcpa2010

Level 10

I figured that's what you meant, but in the current societal discourse, I just could not resist!

sjrcpa

Level 15

It's called apportionment and works the way Jeff described.

Allocation is rarely appropriate or allowed.

Shareholders may end up filling DE nonresident returns, too.

The more I know the more I don’t know.

HOPE2

Level 7

Hi @bryce

This year I faced an issue with one federal Form 1120-S and two state returns (Virginia and California). I would like to know how you handled this situation, especially with prorating income and expenses in ProSeries.

I could not find any area similar to the 1040 where you can create two states on an 1120-S or make an allocation. Could you please help me with this? And what did you do to depreciation adjustment? I have to file CA s-corp as final return.

sjrcpa

Level 15

@HOPE2 I gave you the answer-apportionment not allocation - in your other post

https://accountants.intuit.com/community/proseries-tax-discussions/discussion/s-corp-withdrawn-from-ca-moved-to-va/00/340132

I don't use ProSeries so I can't help with the actual mechanics.

The more I know the more I don’t know.

HOPE2

Level 7

Thanks, @sjrcpa. I need to know how to prepare this in ProSeries. I understand that I need to prorate each state’s share, but practically, I do not know how to do this in the software. This is the most important step for me to be able to move forward and e-file the return.

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