Discussion:Any Kentucky Accountants Out There?
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Discussion Forum Index --> Consumer Questions --> Any Kentucky Accountants Out There?
| 24 December 2006 | |
| I own an S corp in Illinois, and all revenue/work performed has been in IL to date. If I perform work in Kentucky resulting in revenue, will they honor my s corp status without me having to file any sort of election? As in, would they be happy with just a KY s corp return at the end of the year?
More confusing to me still is the matter of what to do with salary paid for time worked in Kentucky. Does the corp need to withhold and pay KY taxes as it goes or can it just be settled at the end of the year? All this time, how do I avoid having to withhold IL tax since the work was performed out of state? | |
| 24 December 2006 | |
| JC; Merry Christmas to you!!
You are incorporated in Illinois so they expect tax returns as I am sure you know. To do business in KY; you have to register with the Secretary of State in KY and ask to do business as a "foreign corporation". They certainly can tax revenue earned in their state, so you will need to pay income/franchise taxes to them (if applicable). Wages earned in KY are going to be subject to KY withholding but most likely will not be taxed in the Illinois jurisdiction. Residents of Illinois who work in KY can claim an exemption from the withholding by filing form 42A809 and submit it to their employer (your S corp). If you however reside in KY and are domiciled there, then you will have to pay withholding on thatincome. Most states have a reciprocal agreement with other states so that you do not have to pay withholding on wages earned in the other state. But if you live in the other state for over 183 days during the year, the reciprocal agreement does not apply generally. Hope this helps. :) | |
| 24 December 2006 | |
| A merry Christmas to you as well! After reading your helpful response, I looked it up, and lo and behold, Kentucky does have a reciprocity agreement with Illinois, which is great. As I understand it, this means I will just file the foreign corporation form, the exemption form (for my Illinois resident employees), then a KY corporate return at the end of the year which details only revenue and deductions related to work in KY? And I will personally be liable for this KY corp profit tax?
Do I then receive a credit with Illinois for this tax that I pay to Kentucky? Or can I just leave the KY revenue/deductions off of my IL-1120-ST-X? | |
| 25 December 2006 | |
| Glad this was a bit helpful to you. Your federal return will be "consolidated" for all the states in which your corporation does business. That being said, your state income tax return for Illinois (if you are a resident there) will show your profits/losses from your S corp at the Federal Level. You will file as S-corp return with KY and on the K-1 indicate what percentage of the income/losses are attributable to KY; then you will file a non resident tax return with KY. KY has a website I am certain to indicate what you will need to do in order to do business as a "foreign corporation" in that state and what filing requirements you will have as a non resident. :) | |
