NYS K-1 different than Fed

[schirallicpa]

I have a client that receives 1065 K-1. Then gets NY K-1 and PA k-1, which basically splits the income between the 2 states. PA has its own handy K-1 input sheet. NYS does not. PA just taxes it's own income. NYS does not.

Initially, I figured the difference between the state K-1s would go on the NYS return on line 31 with other NYS subtractions. However, looking back at last years return, the previous accountant did not do that. They, instead, took a resident credit for the tax paid on that amount in PA. The tax difference in treating it that way is quite a bit. I'm stumped as to the correct treatment. I'm thinking now that the previous tax prepr was correct, because NY taxes all income unless specifically excluded. BUT - then why different amounts on the NYS K-1 - why wouldn't that just be the same as Fed.

ANY NYS people out there today?

[David1980]

NYS does tax all income for residents. If they weren't a resident of NY then it becomes useful. For example, if the taxpayer lived in New Jersey they would file a non-resident NY return and then only the amounts shown for NY would be taxable to NY. So sounds like prior accountant did it correct.

http://www.tax.state.ny.us/pdf/2008/inc/it203i_2008.pdf

If you were a nonresident of New York State, you are subject

to New York State tax on income you received from New York

State sources in 2008.

Most states work that way. Residents taxed on everything with a credit for taxes paid to other states. Non-residents taxed only on the income sourced to that state. There are exceptions when states have reciprocal agreements and so on.

[joanmcq]

Watch for state adjustments. For example, a CA K-1 could be different from the federal one because of nonconformity of depreciation expenses, or a lot of other items. If NY doesn't conform to federal law, (and I know PA doesn't) then the two would not necessarily add up to federal.