In 2012 and 2013, I worked for a company (LLC) that awarded me shares in the company as a form of compensation (edit: the shares were issued in early 2013). I have since left the company and they bought back the shares.

I had been waiting to complete my 2013 taxes until I received the K-1 from this company. I received the K-1 yesterday, and in addition to the K-1 for federal and for Illinois, I also received K-1 "equivalents" from two other states (California and Florida).

Does this mean I need to file returns with each state for which I got a K-1 equivalent?

Can software packages like TurboTax and TaxAct handle this kind of situation?

  • Was the company operating in California and Florida as well? – jonsca Apr 3 '14 at 14:25
  • Did you not have to handle this for 2012 taxes? Do you know the taxable year of the LLC? – NL7 Apr 3 '14 at 14:56
  • @NL7: What I said is technically correct, but terribly misleading. The equity was issued in 2013, not long before I left the company. I'll clarify. – Phil Sandler Apr 4 '14 at 0:48
  • Yes, they had offices in Florida and California. – Phil Sandler Apr 4 '14 at 0:50

You received K-1 for the States in which the LLC was operating and had income from. You should check if your personal income from these states (income reported to you on the K-1s) puts you above the filing threshold in these states - if so then yes, you should file a tax return there. You would probably be filing non-resident tax return only for the income sourced in these states.

LLC is a pass-through entity that doesn't pay its own taxes (except for California, but its a different tax and you have double taxation there), you as a partner have the burden of paying the taxes on the portion of income attributed to you.

I don't know whether tax packages handle this situation well, but I generally have good experience with TurboTax. All of them definitely support K-1s and income sourced to a particular state.

  • Good point about the threshold--probably don't need to file in the additional states, as the amount is small. I decided to file an extension and have a tax professional do my taxes, as I didn't feel comfortable enough with answering TurboTax's questions. Thanks for your answer. – Phil Sandler Apr 5 '14 at 21:38

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