I now more fully understand your issue, and not sure there is an authoritative answer - at least not one with which I am familiar.

The K-1 for a subchapter S embraces the time period for a fiscal year. Most of them today are the same as calendar years but they don't necessarily have to be. With respect to anything written in code or regs, I am virtually certain there is no restriction to a calendar year.

Secondly, if there is no requirement for these state "withholdings" to be reported on the K-1, the fiscal year issue may be moot anyway. And to my knowledge, there is no such requirement to report such state withholdings from dividends on a K-1. All relevant corporations do report these withholdings to shareholders, but I believe this is only as a service and not in response to a requirement.

I believe the proper treatment for a shareholder deducting on Sch A is to deduct the withholdings that occur during the calendar year. A dividend payment in December that has been shortchanged on account of such a withholding would thus give rise to a Sch A deduction for state income taxes. It wouldn't matter that the corporation did not remit until January. The situation would be much the same as a typical payroll distributed to employees on December 30th, with no tax remittal made to the state until January 3rd. The W-2 includes the withheld state tax on 12/30, and the employee is entitled to the deduction.

The only difference is there is no W-2. The information statement is the K-1, and I'm not so sure there is a state tax reporting requirement on the federal K-1, and even if there were - the K-1 could be reflecting a fiscal rather than calendar year.

Some of the extra diligent people on this forum may know of a code/reg/pub that addresses this, but I don't. And I don't think the IRS would allow for any interpretations the states may address.