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CT started this practice, and its history tells you to beware! The entity must pay 6.99% for each partner/shareholder (the state's top tax rate that usually applies to people who make $1 million or so). Initially only 93% of that got passed through to the individuals. Made sense--the entity deducted 7% from its income and the individuals got 93% of the payment because the income passed through has already been reduced. Now, however, the individuals only get 87.5%, so the state is keeping the difference (a disguised entity tax?) Also, entities must pay quarterly and electronically--no excuse if they don't have any money like some small entities (like a partnership that has to pay say $3k quarterly but only has $2k in the bank at the time--what to do?) While it sounds like the state is trying to help folks overcome the SALT limit, it's a money grab. Some states only require the tax on nonresident partners whom they might not otherwise hear from.

Are you sure neither parent qualifies for HOH? Just because the kids "claimed" themselves, it doesn't mean that they should have. If either kid is full time student under age 24 and did not provide over 1/2 of their own support, HOH, education credits and even EIC may come into play.

Reading this post definitely reinforces my decision not to deal with divorced clients.

Contrarian as often the case? "I don't prepare their payroll" means "I do not handle audits based on data/figures/choices I had no control over". "This client uses a payroll program" They have taken on responsibility for their payroll, and should be doing so in all respects, audits, reports, etc. Any fair PR software will have the reports they need.