Need help from Hawaii taxpro!

Doing a 2021 S-corp with CA and HI. The company biz was affected by Covid, stopped operation as of 12/31/2020. No sales for all of 2021. There was a misc income, writing off AP about 100k, assume no expenses. The company HQ is in CA, so all the income should be attributed to CA. However, the 100K income is flowing to HI N-35 regardless, resulting a tax due for the withholding tax. We did not make extension payment by 4/20. I am using Lacerte.

Is there a way to not have the 100k flow to N35 as income? I am not sure if this is a Lacerte issue or this is just how it should be reported for HI. Doesn't seem fair because company has no presence in HI for all of 2021, no physical presence, no payroll, no sales.

Thx in advance.

Is it maybe that the income is being picked up as HI income by Lacerte?
Look on the N-35 schedule K on page 3 and see if there is anything listed in income on column b. for "attributable to Hawaii."

Aloha...

Not sure how to show it in Lacerte, but you certainly can (and likely should) apportion any non-Hawaii-sourced income.

I agree with Miles.

Especially if it is a Hawaii-based entity, it might still show up on the N35 page 1, but if you dig a bit deeper to page 3 on Schedule K, you will see columns for income attributed in Hawaii as compared to elsewhere.

if you can get the Schedule K looking correct, the K1s will naturally follow. Be sure to include the Hawaii K1s along with the federal K1s to any SH that are not your clients.

Thx, I have allocated zero income to Hawaii and forced the apportionment ratio to be 0%. Lacerte is no longer calculating income tax withholding even thought the N-35 1st page still showing a income figure.

thx for the help!