Common questions and answers regarding North Carolina Taxed Partnership with a 1065 return using CCH® ProSystem fx® Tax and CCH Axcess™ Tax.

  • Article Type:
  • QA
  • Last Modified:
  • 04/25/2023

Question

What are some common questions and answers regarding North Carolina passthrough entity tax with a Partnership return?

Environment

  • CCH® ProSystem fx® Tax
  • CCH Axcess™ Tax
  • Partnership – 1065
  • Worksheet View – WSV
  • Interview Forms - IVF
  • North Carolina - NC
  • Pass-through entity tax - PTET

Answer

QuestionAnswer
-Form Name
  • D-403
-State Links
Election for PTE
-Is an Election Required?
  • Yes, an election on an eligible PTE can be made.
  • Partnerships become ineligible for the election if it has partner entity types C and T at any time during the year (Corporation and Trust).
  • A partnership may not elect PTE that has at any time during the taxable year a partner who is not one of the following:
    • (I) An individual
    • (E) An estate
    • (G) A trust described in section 1361(c)(2) of the Code.
    • (M) An organization described in section 1361(c)(6) of the Code
    • (L) A Limited Liability Company (LLC)
    • (P) A Limited Partnership - LP (release 2022.03040 / 2022-3.4)
    • (A) A General Partnership - GP (release 2022.03040 / 2022-3.4)
    • (S) An S Corporation (release 2022.03040 / 2022-3.4)
    • (N) A Limited Liability Partnership - LLP  (release 2022.03040 / 2022-3.4)
    • (R) Individual Retirement Account - IRA
    • (K) Keogh plan
    • (Q) SEP
  • Important: The following partnerships are not eligible to make
    the election to be a Taxed Partnership: A publicly traded partnership that is described in section 7704(c) of the Internal Revenue Code (“Code”).
-Made when?
  • An eligible PTE can make the Taxed PTE Election by timely filing a NC Tax Return for a tax year that begins on or after January 1, 2022.
-Good for?
  • If a partnership does not answer “Yes” to the Taxed Partnership question, the partnership is NOT a Taxed Partnership for the tax year.
    Note: If the partnership makes a Taxed Partnership election for the tax year, the election is binding on all partners for the tax year.
-How do we make this election?
  • Check the box on D-403 page 1
-Separate Form needed?
  • No
-Option to Opt-Out?
  • A Taxed PTE can revoke the Taxed PTE Election if an authorized person requests the revocation prior to the due date of the NC Tax Return, including any extensions.
Generation of State PTE Return
-How do we generate the form above?
  • Common State/City > State PTE Generation > State PTE Return Generation > Illinois - Generate State PTE return.
    • Interview Form PTE-ST1, Box 186.
  • North Carolina > General Information.
    • Interview North Carolina > NC1.
-Is this a separate filing from the main form, part of the main form, or filed on it's own?
  • It is the main form.
Estimates
-Are there estimates for this form?
  • NC-40 PTE
-How do we generate them?
  • If PTE election made and estimated tax due is $500 or more, the NC-40 PTE will generate.
  • To control this use Payments/Penalties/Estimates > State Estimate Preparation and Application of Overpayment.
  • or North Carolina > Payments/Penalties > North Carolina Estimates.
    • Interview North Carolina > NC1.
-Can you apply an overpayment from the current year form?
  • Yes, use Payments/Penalties/Estimates > State Estimate Preparation and Application of Overpayment.
  • or North Carolina > Payments/Penalties > North Carolina Estimates
    • Interview North Carolina > NC1.
Interest/Penalties
-Do interest/penalties apply?
  • Yes.
- If yes, how do we request the calculation?
  • Interest and penalty can be requested on Payments/Penalties/Estimates > Penalties > State/City Late Interest and Penalties.
  • or North Carolina > Payments/Penalties > Late Interest and Penalties.
    • Interview North Carolina > NC9.
-Is there an underpayment penalty?
  • Since the PTE election is new for 2022, there is no underpayment penalty assessed on the 2022 tax reports.
  • After 2022, CD-429B is used to calculate the underpayment penalty.
    • This form is retained for your records and the amount is reported on D-403 part 1 line 21c.
    • This can be requested using Payments/Penalties/Estimates > Penalties > State/City Underpayment Penalty.
      • Interview North Carolina > NC5 and NC9.
Additional PTE Information
Common State > State PTE Generation worksheet > Grid 23  (Interview PTE-ST1, boxes 300-364)
-Does this section apply to this state?
  • No
Additional Input Available
- Does new input options under State and City Tax Refund flow to the state?
  • No
- Does new input options under Taxes and Licenses flow to the state?
  • No
- Does new input options under Rent/Royalty flow to the state?
  • No
- Does the new input options under Farm flow to the state?
  • No

Additional Information

N/A

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