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Under New Jersey law, pass-through entities are required to supply a New Jersey Schedule K-1 showing the income calculated under New Jersey law that should be reported on the individual's New Jersey return. An example of an S corporation New Jersey Schedule K-1 can be seen here.

If a shareholder has a New Jersey Schedule K-1 from a S corporation and the 1120S return was prepared in the application, the New Jersey information will data share into the individual New Jersey return. See 1040-NJ: Data sharing Schedule K-1 information for more details. If the New Jersey Schedule K-1 was not prepared in the application, enter the data as follows:

• Part II, Line 1 - The S income/loss allocated to NJ on line 1 is only applicable to part-year or nonresidents of NJ. Enter this amount on federal Screen K1-2 in the Ordinary business income (loss) - State, if different field. If the K-1 is coded to a state other than New Jersey (via the State postal code field), use the NJ column in the Allocation grid instead.   
• Part II, Line 3 - If the taxpayer is a resident of New Jersey, enter the pro rate share of S corporation income or loss on federal Screen K1-2 in the Ordinary business income (loss) - State, if different field. If the K-1 is coded to a state other than New Jersey (via the State postal code field), use the NJ column in the Allocation grid instead. For part-year and nonresidents, enter this amount on federal Screen K1St in the Ordinary income everywhere field. If the K-1 is multi-state, multiple screens of K1St will exist. Verify that the ordinary income amount is entered on the NJ unit.
• Part II, Line 6 - When an amount is on this line, there is a gain or loss from a sale of the S-corp and the federal K1 unit should be marked as disposed of on federal Screen K1-2. Use federal Screen Sale or the Schedule for detail statement on federal Screen B&D to enter the sale information.
• Part II, Line 7 - Enter the total payments made on behalf of the shareholder on federal Screen K1-4 in the State income tax withheld - State, if different field. If the K-1 is coded to a state other than New Jersey (via the State postal code field) use the NJ column in the Allocation grid instead.
• Part V, Line 1 - If there was interest paid to the shareholder, the taxpayer should have also received a 1099-INT. Enter the interest on federal Screen B&D in the Interest income statement dialog. 
• Part V, Line 3 - Enter the shareholder's HEZ deduction on Screen NJAdj-2 in the Health enterprise zone deduction field. Note that this amount is the total amount and not a "per K-1" amount. 

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