How to Handle Multi-State K-1 Reporting for Partnership Investments?

12 This is a classic tiered partnership reporting situation. The short answer is yes, you likely do need to file non-resident returns in states C and D (Florida and Texas) if there's sourced income from those states flowing to you via the K-1. When you invest in a partnership that itself invests in other partnerships in different states, you generally have filing obligations in each state where income is sourced, regardless of whether you personally visited those states. This is because partnership income is considered "passed through" to you. However, there's a wrinkle here - Florida doesn't have personal income tax and Texas doesn't tax passive investment income for non-residents. So despite receiving K-1 information from those states, you might not actually need to file returns there. If the partnership was invested in states with income taxes (like California or New York), then you would almost certainly have filing requirements. The Colorado partnership should provide you with state K-1 equivalents or at least a breakdown of income by state. This information is crucial for determining your filing obligations.

7 I went through something similar last year with my multi-state investments. After spinning my wheels for weeks, I found this service called taxr.ai (https://taxr.ai) that specializes in analyzing complex K-1 situations. They have this cool feature where you upload your K-1s and they identify all your state filing requirements automatically. Saved me a ton of headaches because they flagged that I didn't actually need to file in two states I thought I did, but did need to file in another I wasn't aware of. The partnership structure was creating this weird situation where income was being reported in states where I had no actual filing requirement. They also helped identify which deductions could be claimed on which state returns.

14 Just wanted to follow up after trying taxr.ai that someone mentioned above. It was seriously game-changing for my multi-state partnership situation! Uploaded my K-1s from three different states plus my rental property docs, and within a day I had a complete analysis showing exactly where I needed to file and where I didn't. The most valuable part was discovering I actually didn't need to file in Montana despite having K-1 income sourced there because of how my particular partnership was structured. Saved me $300 in unnecessary filing fees! They also caught that I was entitled to claim resident tax credits on my home state return for taxes paid to two other states, which my previous accountant had missed.

5 If you're having trouble getting answers about your multi-state partnership reporting, good luck trying to call any state tax departments directly. I spent HOURS on hold with Colorado trying to get clarity on their pass-through entity rules. Finally found Claimyr (https://claimyr.com) and watched their demo video (https://youtu.be/_kiP6q8DX5c) and they actually got someone from the state tax department to call ME back within 45 minutes. The state tax rep confirmed that in my case, I DID need to file in the states where the underlying partnerships had properties, even though I was getting the K-1 through an intermediary partnership. Saved me potential penalties by getting a definitive answer from the actual tax authority. Sometimes you just need to speak directly with someone official, especially with these complex multi-state partnership situations.

22 Well I need to eat my words about Claimyr. I tried it yesterday after posting my skeptical comment. Had a complex question about partnership K-1 filing requirements across multiple states that none of my colleagues could answer definitively. Got a call back from the state tax department in just under an hour! The representative was able to confirm that in my specific partnership structure, I only needed to file in states where the final-tier partnership owned physical property, not in all the intermediary states. This just saved one of my clients about $1,700 in unnecessary state filing fees. I've been practicing for 15 years and I'm usually pretty cynical about these services, but this one delivered exactly what it promised. Going to use it for all my state tax department calls from now on.

18 Something that hasn't been mentioned yet is composite returns. Many partnerships will file a composite return in states C & D and pay tax on your behalf. You'd still report the income on your resident state return (state A), but might not need separate non-resident returns for states C & D. Check box 9 on your K-1 to see if they've indicated composite filing in any states. This could save you from filing separate returns in multiple states while still meeting your tax obligations.

11 Just a heads up, if you use tax preparation software, most of the major ones have multi-state capabilities that can help sort this out. I use TaxSlayer and it handled my 4-state partnership situation pretty well, automatically generating the necessary non-resident returns based on my K-1 input.

I've been dealing with a similar multi-tiered partnership situation for the past two years, and here's what I've learned through painful experience: First, you're absolutely right to be cautious about unnecessary filings. Since Florida has no personal income tax and Texas generally doesn't tax passive investment income for non-residents, you likely won't owe anything in those states even if you technically have sourced income there. However, the key thing to watch for is whether the underlying LLCs are engaged in active business operations versus just holding rental properties. If they're actively managing real estate (property management, development, etc.), some states might consider this "doing business" which could trigger different filing requirements. One thing that really helped me was requesting a detailed breakdown from the Colorado partnership showing exactly what type of income is being sourced from each state. Many partnerships provide generic K-1s without this detail, but they should have the underlying information available. Also, don't overlook potential reciprocity agreements or credits. Wisconsin might have provisions that reduce your overall tax burden from multi-state filings, especially if you end up owing taxes in other states. The bottom line: get the state-by-state income breakdown first, then determine actual filing requirements rather than assuming you need to file everywhere income is sourced.

The Wisconsin Department of Revenue website has a good section on reciprocity agreements and tax credits for taxes paid to other states. You can find it under their "Nonresident and Part-Year Resident" section. Generally, Wisconsin allows credits for income taxes paid to other states, which can significantly reduce your overall burden. For researching reciprocity by state, the Federation of Tax Administrators has a useful chart showing which states have reciprocal agreements, though it's more helpful for wage income than partnership income. For partnership-specific rules, you'll likely need to check each state's tax department website individually. One thing I learned the hard way - some states have "safe harbor" provisions for small amounts of partnership income (usually under $1,000-$3,000 depending on the state) where you don't need to file even if income is technically sourced there. Colorado itself has such provisions for non-resident partners in certain situations. Since your partnership involves active property management, I'd definitely recommend getting that state-by-state breakdown before making any filing decisions. The nature of the activity can completely change your obligations, and it sounds like you're in a similar situation to what I dealt with. Better to get the details upfront than deal with amended returns later!