Discussion:S corp owner lives in other state
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Discussion Forum Index --> Tax Questions --> S corp owner lives in other state
| 20 June 2008 | |
| I have a client who lives in NJ but owns a gas station in MO...Does he need to file MO tax return as non resident...he is one of the 5 partners..he has schedule k-1 from this gas station (S Corporation)...Along same lines, I have a real state broker who lives in KC, MO and sells some properties in Kansas City, KS...does he have to declare KS income as a non resident (lives in MO side)...Does he need to file KS state tax return.. | |
| June 20, 2008 | |
| yes & yes.
If the income is sourced from a specific state (ie the gas station in MO), he has to file a MO return (I'm assuming MO has income tax....and same for KS). Wait 'till KatieJ shows up & she'll give you a lot more detail about the individual states. | |
| June 20, 2008 | |
| Do a search on 'nexus' and you'll get some pertinent info; not specifically on S corp ownership but still dealing with the concept of having to file in multiple states. | |
| 20 June 2008 | |
| He may well have a income in the other states but rather he has a filing requirement or not is determined by that states minimum filing requirements. The income derived may not reach the threshold for filing. | |
| 20 June 2008 | |
| MO allows the Corp to file a composite return for NR shareholders. That way MO-1040 not required. Interesting that the MO DOR website tells you to write or call them for info. Phone No. is 573-751-1467 | |
| 20 June 2008 | |
| KCGuy, as Belle says, both of your clients have income from sources in the nonresident states, and unless the amounts are below a de minimis threshold set by the state, they have a filing requirement. Usually if there is no income, or not enough income to create a tax liability, there is no penalty for failing to file a nonresident return. However, it may be wise to go ahead and file even if the income is negative; the state may allow such a loss to be carried forward and offset against source income in later years. (Not in Missouri, though, unless there is a federal NOLD in the same utilization year.)
In both cases, the resident state (NJ or MO) will allow credit for the tax paid to the nonresident state (MO or KS), limited to the proportion of the resident state tax that relates to that "double taxed" income. Net, the client pays tax on that income at the higher of the two states' average rates for his filing status, income level, number of dependents, etc. | |
| 20 June 2008 | |
| P.S. there are generally some prices to pay for the convenience of filing a composite nonresident individual return on behalf of a group of nonresident partners or S corporation stockholders. Usually the tax must be paid at the highest marginal rate, so the benefit of any graduated rate structure is lost. However, the state of residence generally will allow credit for the tax that was allocated to an individual resident stockholder on a composite return. | |
| 20 June 2008 | |
| I agree that the tax may be higher, but the difference is probably less than the fee I will charge for doing an out of state return. | |
| 20 June 2008 | |
| Thanks a lot...For MO the limit is $600, I just called MO DOR and they gave me this net income number... | |
WIBadgerCPA (talk|edits) said: | 20 June 2008 |
| New for 2007 in Wisconsin is Form PW-1, which requires income tax withholding on Wisconsin income allocable to nonresident partners/shareholders. Kind of forces the nonresident owners to file the return. | |
| June 20, 2008 | |
| And Gov. Doyle has more money to pay off his friends with. Can't wail til he calls Blago here in IL with that one. They must talk you know? Every bad idea in the one state ends up in the other, and usually pretty quickly. I wonder, could we get them both out deer hunting somewhere? Oh, no, they're both antigunners. OK, fishing then, waaaaaaay offshore. . .ORRRR! maybe stand here and guard Lake Delton just before it's refilled. | |
| 25 June 2008 | |
| Oh, keep on whistling past that graveyard, JR <G>! Illinois requires withholding on nonresident partners, S corporation stockholders, and trust beneficiaries, effective for years ending after 2008. ILCS § 5/709.5, as amended by L. 2008, P.A. 95-707, § 5-15.
Wisconsin has required withholding on nonresident partners since 2005. (Wis. Stat. § 71.775 enacted by L. 2005, Act. 25, § 1431, first applies to taxable years beginning on 1-1-05; Act 254, § 19; amended by L. 2007, Act 20, §§ 2131-2135. As far as I can tell, these are the only states that impose comprehensive individual income taxes and do NOT require withholding on nonresident partners/LLC members or require the entity to pay the tax on their behalf: Arizona, Delaware, the District of Columbia, Hawaii, Idaho, Massachusetts, and Utah. Delaware, Hawaii and Utah do require withholding on nonresident S corporation stockholders, however. That list gets shorter every year. | |
| 26 June 2008 | |
| Some states require the business to w/h state taxes for the non resident s corp shareholder. Therefore a tax return w/b required to get a refund or pay the tax. | |
| 26 June 2008 | |
| Most of the states that require withholding on nonresident parters also either require S corporations to withhold on nonresident stockholders, or else tax the S corporation at the corporate level, either in toto or on the proportion of the corporation's income that is attributable to nonresident stockholders. | |
| 26 June 2008 | |
| Katie, I seem to recall Kansas being a state that would require withholding Toto. Or at least Mrs. Gulch wanted to. | |
