Enter pass-through entity tax (PTET) for an 1120 return (2024)

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Overview

Federal 1040 Schedule A limits the itemized deduction for state income taxes paid to $10,000. However, some states let S corporations pay state taxes on behalf of a shareholder. The S corporation can then take an itemized deduction on Form 1120 for state income taxes paid that's not subject to the $10,000 limit. As a result, the amount of federal income that passes through from the entity reflects an itemized deduction for the entire amount of state taxes paid. The overall taxable income that the individual taxpayer reports on Form 1040 is then less than if the S corporation had not paid taxes on behalf of the Individual.

States that allow these pass-through entity tax (PTET) credits provide a means to calculate a tax at theS Corporationlevel using:

  • a separate tax form (similar to a composite return), or

  • Fields within the main return designed to calculate a tax.

The state's K-1 (or equivalent) will include reporting information required to prepare the shareholder's tax return.

State-specific entry

Alabama

To add Form EPT to the Alabama return, go to

File

then

Client Properties

. Select

EPT Pass-Through Entity Tax

on the Alabama tab.

Form EPT is a separately filed return, and you can e-file it.

Arizona

To elect PTET, go to the AZGenS screen and select

Elect to pay Pass-through entity tax(Scorp)

. Tax is calculated on Form120S, Page 3,Part 2, Line 47 and Line 51.

You can review filing instructions on the AZ website.

Arkansas

To add Form 1100PET to the Arkansas return, go to the ARGenS screen and select

Elect to pay tax at the entity level (Form 1100PET)

. In addition to Form 1100PET, there are also Form AR 362for the election and Form AR 1155-PET for the extension.

You can e-file the PTET forms.

You can review filing instructions and FAQs on the AR website.

California

To add Form 3804 to the California return, go to

View

then

Shareholder Information

. Select

Electing pass-through entity tax

for each applicable shareholder.

Colorado

To elect PTET, go to the COGenS screen and select

Elect to file and pay Pass-through entity tax

. Tax is calculated on FormDR 0106, Page 2,Part 3, Line 20.

Georgia

To elect PTET, go to the GAGenS screen and select

S Corporation elects to pay the tax at the entity level (Scorp)

.Visit 560-7-3-.03 Election to Pay Tax at the Pass-Through Entity level for more information on the pass-through entity tax calculation and filing requirements.

Hawaii

To elect PTET, go to the HIGenS screen and select

Elect to pay tax at the entity level

. Tax is calculated onSchedule PTE, Pass-through Entity Tax Calculation and Schedule PTE-U, Upper-Tier Pass-Through Entity Tax Credit Allocation (if applicable). These schedules will be part of the e-file.Visit https://files.hawaii.gov/tax/legal/tir/tir23-01.pdf and https://files.hawaii.gov/tax/legal/tir/tir23-03.pdf for more information on the pass-through entity tax calculation and filing requirements.

Idaho

To elect to be an affected business entity, go to the IDGen screen and select

Elect to be affected business entity

. Tax is calculated on Form 41S, Page 2, Line 44.

Illinois

To elect PTET, go to the ILGen screen and select

Elect to pay Pass-through entity tax

. PTE Income calculates on the IL Pass-Through Entity Tax Income Worksheet.The Income is on Form IL-1120-ST, Page 3, Line 60.The Pass-Through Entity Tax is on Form IL-1120-ST, Page 3, Line 61.

Indiana

To elect PTET, go to the INGen screen and select

Elect to file and pay Pass-through entity tax

. The tax is calculated on Schedule IN-PTET.

Iowa

To elect PTET, go to the IAGen screen and select

Elect to file and pay Pass-through entity tax

. The tax is calculated onIA 1120S, Page 4, Part 6. Visit https://tax.iowa.gov/idr-releases-updated-tax-guidance-pass-through-entity-tax for more information

Kansas

To elect PTET, go to the KSGenS screen and select

Elect to pay tax at the entity level

. Tax is calculated onForm K-120S, Page 2, Line 31.Visit https://www.ksrevenue.gov/pdf/k-120s22.pdf for more information

Kentucky

To add Form 740-PTET to the Kentucky return, go to

File

then

Client Properties

. Select

740-PTET Pass-Through Entity Tax

on the Kentucky tab.

Once added, go to the KYPTE screen and select

Elect to file and pay Pass-through entity tax

.

The following forms are available.

  • Form 740-PTET, Kentucky Pass-Through Entity Tax

  • Form KPTET-V, Kentucky Pass Through Entity Tax Payment Voucher

  • Form PTET-CR, Kentucky Pass-Through Entity Tax on Distributive Share Income

  • Form 740-PTET-ES, Pass Through Entity Tax Estimated Voucher

  • Form 740-PTET-EXT, Extension of Time to File Kentucky Form 740-PTET

  • KY PTET Financial Transaction Record

  • KY PTET Late Filing Interest and Penalty Worksheet

Form 740-PTET is a separately filed return, and you can e-file it.

Maryland

To addForm 511, Pass-Through Entity Election Income Tax Return,to theMaryland return, go to the General folder of an S-Corp return and mark the

Elect to pay tax at the entity level (Form 511)

checkbox.

Massachusetts

To add Form 69D-ELT to theMassachusettsreturn, go to

File

then

Client Properties

. Select

63D-ELT Entity Level Tax

on theMassachusettstab.

Once added, go to the MAELT screen and select

Pass-through entity has elected to pay at the entity level

.

Taxis 5% of qualified income. Qualified members still need to file their normal individual return or be part of a composite return, but will get a credit for 90% of their allocated Entity Level Tax.

The Entity level tax return is a stand alone return with its own separateextension and estimates. You're required to e-file the return and extension and pay electronically, either using Electronic Funds Transfer (EFT) on the state's MassTaxConnectwebsite or using Electronic Funds Withdrawal (EFW) in UltraTaxCS.

You can find filing instructions and FAQs on Massachusetts website.

Michigan

  • Enter the flow-through entity tax credit on the MICrS screen in

    Flow-through entity tax credit

    .The shareholder’s share of the amount you enter in this field calculates on the MI Shareholder’s Share of Income and Modifications Worksheet and on Form 807, Page 3, Column 4 Allocated Share of Flow-Through Entity Tax Credit if applicable.
  • Enter the State amount of the taxes in

    Taxes on or measured by net income

    on the MICrS screen. The shareholder’s share of the amount you enter in this field calculates on the MI Shareholder’s Share of Income and Modifications Worksheet.

Minnesota

To elect PTET, go to the MNGenS screen and select

Pass-through Entity (PTE) Tax

. Tax is calculated onSchedule PTE and reported/paid/filed with Form M8.Visit https://www.revenue.state.mn.us/pass-through-entity-pte-tax for more information

Mississippi

To elect PTET, go to the MSGen screen and select

Election to pay tax on behalf of all shareholders (S.A.L.T. response)

. Tax is calculated onForm84-105, Page 1,Line 6.

Visit Updated EPTE FAQ for more information.

Missouri

To add Form MO-PTE to theMissouri return, go to

File

then

Client Properties

. Select

MO-PTE Pass-through Entity Tax

on theMissouri tab.

Once added, go to the MOPTE screen and select

Elect to file and pay Pass-through entity tax

.

Montana

To elect PTET, go to the MTGenS screen and select

Elect to file and pay Pass-through entity tax

. Income and tax are calculated onForm PTE, Page 2, Line 24 and Line 25. You can find FAQs and Instructions on Montana's website.

Nebraska

To elect PTET, go to the NEGenS screen and select

S Corporation elects to pay tax at the entity level

. Income and tax are calculated onNebraska Schedule PTET. For more information, visit https://revenue.nebraska.gov/about/frequently-asked-questions/pass-through-entity-tax-faqs.

New Jersey

To elect PTE tax, New Jersey requires an annual election to be made on-line at NJ Pass-Through Business Alternative Income Tax (PTE) Login (state.nj.us).

After the annual election has been made, go to Client properties and select PTE-100 Pass through Entity Tax on the New Jersey tab.

Next, visit Screen NJPTEGen and mark the Entity has timely filed the on-line election to file Form PTE-100 for current tax year field.

The tax is calculated on Form PTE-100, Page 1, Line 2.

For New Jersey, Form PTE-100 is a separate return, and can be e-filed separately, as well as its extension (PTE-200T) and Estimates (PTE-150).

New Mexico

To elect PTET, go to the NMGenS screen and select

Electing entity-level tax

. Tax is calculated on Form S-Corp-1, Line 27. For more information, visit New Mexico's website.

New York

The tax should be filed online through NY Web File.To add it to the return,go to

File

then

Client Properties

. Select

Pass-through Entity Tax

on theNew York tab.

UltraTax CS calculates the PTE Taxable Income on the PTE Computation of PTE Taxable Income Worksheet.

Additional information on the filing of this return can be found here: https://www.tax.ny.gov/bus/ptet/

New YorkCity

The tax should be filed online through NY Web File.To add it to the return,go to

File

then

Client Properties

. Select

Pass-through Entity Tax

on theNew York tab.

UltraTax CS calculates the NYC PTE taxable Income and PTET tax on the Computation of PTE Taxable Income Worksheet.

Additional information on the filing of this return can be found here: https://www.tax.ny.gov/bus/ptet/

North Carolina

To elect PTET, go to the NCGen screen and select

Elect to file and pay as a Taxed S Corporation

. Tax is calculated onForm CD-401S, Page 2 Line 19.

Ohio

To add FormIT4738to the Ohio return, go to

File

then

Client Properties

. Select

IT 4738 Pass-through Entity Tax

on theOhio tab.Tax is calculated onFormIT4738, Electing Pass-Through Entity Income Tax Return, which is a separate return you can e-file. You can find more information on Ohio's website.

Oregon

To add Form OR-21 to theOregon return, go to

File

then

Client Properties

. Select

OR-21 Pass-through Entity Tax

on theOregon tab.

Once added, go to theORPTEGenscreen and select an option in

Elect or revoke election to file and pay pass-through entity tax

.

The following forms are available:

  • FormOR-21, Oregon Pass-through Entity Elective Tax Return

  • ScheduleOR-21-AP, Oregon Pass-through Entity Elective Tax Apportionment of Income

  • Schedule OR-21-MD, Oregon Pass-through Entity Elective Tax Member Directory

  • Schedule OR-21-MD-PT, Pass Through of Distributive Share of Proceeds, Addition and Credit

  • Schedule OR-21-K-1,Distributive Share of Proceeds, Addition and Credit

Form OR-21 is a separately filed return, and you must e-file it.

Rhode Island

To add Form RI-PTE to the Rhode Island return, select

File

,then

Client Properties

. Select

RI-PTE Pass-through Entity Tax

on the Rhode Island tab.

Once added, go to the RIPTE screen and select

Elect to file Form RI-PTE for individual shareholders

.

Form RI-PTE is a separately filed return. You can't file it electronically. Those subject to the electronic filing mandate may need to file Form RI-PTE through the Rhode Island Tax Portal.

South Carolina

To elect PTET, go to the SCGen screen and select

ActiveTrade/Business Income for electing S Corporation

. Tax is calculated on Schedule I-435 and reported/paid/filed with Form SC1120S. ScheduleI-435, Column C defaults to the Schedule, SC1120S K-1, Column D (totaled for all shareholders).Those amounts can be forced on Screen SCAdj.

Utah

Utah has online filing only, through Taxpayer Access Point (TAP) website.

The PTE must file and pay SALT tax on or before the last day of the taxable year, then report the amount of SALT tax paid on Form TC-20S, Schedules N, K, and K-1. UltraTax CS will not calculate SALT tax. Use the

AP - Tax paidby pass-through entity

field on the UTCrS screen to report the SALT tax information that was previously filed/paid through the UT TAP website.

For more information, visit SALTReport & Tax FAQ.

Virginia

To elect PTET, go to the VAGenS screen and select

Election to pay Virginiaincome tax at the entity level for the taxable year

. Tax is calculated onForm 502PTET andForm 502PTET ADJ. This return must be e-filed.

For more information,visit Virginia's website.

West Virginia

To elect PTET,enter informationon the WVPTE screen to calculate Schedule EK-1,Schedule of WV Partner/Shareholder/Member/Beneficiary Elective Pass-through Entity Income Credit. Any entity that elects to pay the pass-through entity tax will no longer be obligated to file the PTE-100 (S Corporation main form).You'llneed to file Form EPT-100 through the WV MyTaxes portal.WV doesn't expect to have any other EPT-100 substitute forms.

For more information,visit West Virginia's website.

Wisconsin

To elect PTET, go to the WIGen2 screen and select

Electing to pay tax at the entity level

. Tax is calculated on Schedule 5S-ET and reported on Form 5S, Page 1.
Enter pass-through entity tax (PTET) for an 1120 return (2024)

FAQs

Where do you enter Ptet on tax return? ›

Your California S-Corp return includes a California Schedule K-1 for each shareholder. You can either include a copy of Form 3804 with the CA K-1, or manually enter the amount of PTET allocated to each shareholder on Sch K-1 Line 18e.

How do I report PTET on my federal tax return? ›

In the case of pass-through entity tax (PTET), the estimated payment is not be entered on the federal return. Instead, this is information for the state return and should only be entered there. In most cases, you will find this under Other Credits / Uncommon Credits or Business Income Adjustments for Schedule K-1.

What is pass-through entity Pte elective tax? ›

The PTE elective tax is 9.3% of the entity's qualified net income, which is the sum of the pro rata or distributive share and guaranteed payments of each qualified taxpayers' income subject to California personal income tax.

What is considered a pass-through entity? ›

A pass-through entity, also known as a flow-through entity, is a business entity in which the profits pass through to the owner(s) of that business and are taxed at the individual tax rate. In other words, this business type is not subject to federal income tax.

Where does PTET go on 1120s? ›

The Pass-Through Entity Tax is on Form IL-1120-ST, Page 3, Line 61. . The tax is calculated on Schedule IN-PTET.

Is the PTET tax deductible on federal returns? ›

If the election is made and the PTE tax is paid, this will generate a tax deduction on the entity's federal return, which in turn reduces the taxable income reported on the owners/partners federal K1.

What is Minnesota pass-through entity tax? ›

The Pass-Through Entity (PTE) Tax allows an entity to pay a tax on behalf of their partners, members, or shareholders.

How to calculate pte tax? ›

The PTE tax and credit is equal to 9.3% of each taxpayer's qualified net income. Qualified net income is each consenting qualified taxpayer's total pro rata or distributive income and guaranteed payments that are subject to California income tax.

What is the tax deduction for pass-through entities? ›

199A Deduction) The Tax Cuts and Jobs Act (TCJA) created a deduction for households with income from sole proprietorships, partnerships, and S corporations, which allows taxpayers to exclude up to 20 percent of their pass-through business income from federal income tax.

What is the difference between a pass-through entity and a C Corp? ›

A C corporation pays entity-level income tax and then shareholders pay tax on dividends — and on capital gains when they sell the stock. For pass-through entities, there's no federal income tax at the entity level.

What is PTET and how does it work? ›

PTET is a state or other jurisdiction's mandatory or elective entity-level income tax on S corporations and partnerships income. Each state prescribes its formula for calculating the tax.

How many states have pass-through entity taxes? ›

Overview of elective pass-through entity taxes
StateFirst Effective Year
California2021
Colorado2018 (retroactive)
Connecticut2018 (mandatory until 2024)
Georgia2022
15 more rows
Jun 15, 2023

What is a pass through tax example? ›

Pass-through taxation means that an LLC doesn't file a corporate income tax return with the IRS. Instead, once an LLC has paid its expenses and debts, the LLC owners or members pay tax on any remaining revenue.

What is a disadvantage of a pass-through entity? ›

One important potential downside to a business that elects to operate as a flow-through entity is that the owners will still be taxed on income that they do not directly receive.

Which of the following is not a pass-through entity? ›

Sole proprietorships, general partnerships, limited partnerships, limited liability partnerships, limited liability companies, and S Corporations are all pass-through entities. Corporations, and limited liability companies that elect to be taxed as a corporation, are not pass-through entities.

Where to enter pte tax in Lacerte? ›

Steps to enter a PTE tax credit that has been received:
  • Go to Screen 57.011 - California Other State Credits.
  • Scroll down to Pass-Through Entity Elective Tax Credit (3804-CR).
  • Hold down Ctrl+E in the Passthrough entity elective tax (PTE) credit (Ctrl+E) field.
  • Complete the PTE Name and FEIN columns.

How do I claim my Ptet credit in NY? ›

Each eligible credit claimant must file an individual personal income tax return and attach Form IT-653, Pass-Through Entity Tax Credit, to claim the PTET credit.

What does PTE stand for in taxes? ›

The Pass-Through Entity (PTE) Tax allows an entity to pay a tax on behalf of their partners, members, or shareholders.

What is a pte k1? ›

The Kentucky Form PTE K-1 provides information to each partner or shareholder about their share of income, deductions, and credits from a pass-through entity (PTE), such as a partnership or S corporation.

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