12 CSR 10-2.190 - [Effective until 9/30/2024] Partners and S Corporation Shareholders Composite Individual Income Tax Return Filing Requirements, Withholding of Income Tax Requirements and Partnership/S Corporation Withholding Exemption
PURPOSE: This rule clarifies the circumstances under which a composite individual income tax return for nonresident partners or nonresident S corporation shareholders may be filed and the general contents of the return as well as the withholding requirements for nonresident partners and shareholders and the related withholding exemption. Limited liability companies which are treated as partnership for income tax purposes, and limited liability partnerships, will be considered partnerships for purposes of this rule.
(1) Who May File a
Composite Return.
(A) Any partnership, S
corporation, limited liability partnership or limited liability company
(treated as a partnership for tax purposes), with nonresident partners or S
corporation shareholders not otherwise required to file a Missouri individual
income tax return may file a composite return on behalf of its nonresident
partners or shareholders. If the nonresident partner's or S corporation
shareholder's filing requirements result solely from one (1) or more interests
in any other partnerships or S corporations, that nonresident partner or S
corporation shareholder may be included in the composite return.
(B) A composite return may be filed by all
nonresident partners or S corporation shareholders except-
1. Nonresidents of Missouri who have income
in Missouri from sources other than the partnership or S corporation;
or
2. Nonresidents of Missouri
filing an individual income tax return.
(C) Nonresident partners or S corporation
shareholders who do not qualify to file a composite return must file an
individual income tax return in Missouri reflecting income from all sources
including his/her distributive share of the partnership or S corporation
income, as required under Chapter 143, RSMo. Nonresident partners or S
corporation shareholders who do not file a composite return may be subject to
withholding by the partnership or S corporation on their distributive share of
the partnership's or S corporation's income for the taxable year of the
partnership or S corporation as outlined in section (4).
(2) Time and Place for Filing Partnership or
S Corporation Returns and Payment of Estimated Taxes.
(A) A partnership return or an S corporation
return shall be filed based upon the provisions of the law effective for each
taxable year.
(B) The partnership
return or S corporation return shall reflect the total income of the
partnership or S corporation from all sources and allocate to Missouri that
portion of the total income which is derived from or connected with sources in
Missouri by using the apportionment formula in section
32.200 or
143.451,
RSMo. The ratio with a numerator of that portion of the total income which is
derived from or connected with sources in Missouri and a denominator of the
total income of the partnership or S corporation shall be the basis of
allocation of each nonresident partner's or nonresident shareholder's income to
Missouri by applying that percentage to the total distributable income of each
nonresident partner or shareholder based upon his/her percentage of interest in
the partnership or S corporation.
(C) The estimated tax shall be paid in four
(4) equal installments. The first installment shall be paid when the
declaration is filed; the second and third installments on June 15 and
September 15, respectively, of the taxable year; and the fourth installment on
January 15 of the succeeding taxable year.
(3) Filing Requirements for the Composite
Individual Income Tax Return of Nonresident Partners or Nonresident S
Corporation Shareholders.
(A) In lieu of each
nonresident partner or S corporation shareholder filing a separate individual
income tax return (provided they are not otherwise required to file a return),
the partnership or S corporation may file an individual income tax return under
the name of the partnership or S corporation on or before April 15 of each
year. This return shall show on an appended schedule the name, address, Social
Security number, the amount of each nonresident partner's or nonresident S
corporation shareholder's income from Missouri sources as determined in
subsection (2)(B) and the partner's or shareholder's federal distributive share
of partnership or S corporation income.
(B) The tax rate to be applied to the
Missouri income of each nonresident partner or S corporation shareholder
determined in subsection (2)(B) in lieu of demonstrating the exact amount of
this income, deductions and exemptions is six percent (6%).
(C) The sum of the amount determined in
subsection (3)(B) will be paid by the partnership or S corporation in respect
to the liability of all its nonresident partners or nonresident S corporation
shareholders not otherwise required to file a return.
(D) Timely filing of the composite return by
the partnership or S corporation and timely payment of the tax will discharge
each nonresident partner's or S corporation shareholder's responsibility to
Missouri for filing a Missouri individual income tax return and paying the tax
on the individual income tax return.
(4) Withholding Requirements for a
Partnership or S Corporation.
(A) In addition
to the withholding requirements outlined in Chapter 143, RSMo, partnerships and
S corporations are required to withhold Missouri income tax from any
nonresident individual partner(s) or S corporation shareholder(s) to which the
partnership or S corporation pays or credits amounts on account of their
distributive share of the partnership or S corporation income for the taxable
year.
(B) The partnership or S
corporation is not required to withhold if-
1. The nonresident partner or S corporation
shareholder not otherwise required to file a return agrees to have the Missouri
income tax due paid as part of a composite return;
2. The nonresident partner or S corporation
shareholder, not otherwise required to file a return has Missouri assignable
federal adjusted gross income from the partnership or S corporation of less
than twelve hundred dollars ($1,200);
3. The partnership or S corporation is
liquidated or terminated; and income was generated by a transaction related to
termination or liquidation; or no cash or other property was distributed in the
current and prior taxable year. Note: Exceptions to the withholding requirement
are not exceptions from Missouri income tax. The income generated by the
termination or liquidation, although not subject to withholding, is subject to
Missouri income tax;
4. The
partnership/ S corporation files a signed Form MO-3NR (Partnership/ S
Corporation Withholding Exemption/Revocation Agreement) that was provided to it
by the nonresident partner or S corporation shareholder who has agreed to:
A. File a return in accordance with the
provisions of section
143.181,
RSMo and to make timely payment of all taxes imposed on the partner/ S
corporation shareholder by this state with respect to income of the
partnership/ S corporation; and
B.
Be subject to personal jurisdiction in this state for purposes of the
collection of income taxes, together with related interest and penalties,
imposed on the partner/ S corporation shareholder by this state with respect to
the income of the partnership/ S corporation; or
5. Form MO-3NR will be considered timely
filed for a taxable year, and for all subsequent taxable years, if it is filed
before or in conjunction with the annual return for such taxable year pursuant
to section
143.511,
RSMo. A partnership/ S corporation that does not timely file such an agreement
for a taxable year shall not be precluded from timely filing such an agreement
for subsequent taxable years.
(C) The partnership or S corporation may
determine the tax to be withheld in one (1) of two (2) ways.
1. If the partner or shareholder submits a
Form MO W-4, Missouri Withholding Allowance Certificate, Form MO W-4, the tax
withheld may be determined based on the withholding tables provided by the
director of revenue.
2. If no Form
MO W-4 is submitted the highest rate used to determine a Missouri income tax
liability for an individual, six percent (6%), will be applied to the Missouri
income of each nonresident partner or S corporation shareholder determined in
subsection (2)(B).
(D)
If withholding is remitted to the Department of Revenue on behalf of a
nonresident partner or S corporation shareholder who subsequently has no tax
liability, the partnership or S corporation may file a claim for refund with
the Department of Revenue to recover the amount remitted.
(5) Remitting Withholding on Nonresident
Partners or S Corporation Shareholders to the Department of Revenue.
(A) Withholding should be remitted on Form
MO-1NR, Income Tax Withheld for Nonresident Individual Partners or S
Corporation Shareholders. The Form MO-1NR, all applicable Forms MO-2NR and
payment must be filed by the due date or extended due date for filing the
partnership or S corporation income tax return. An extension of time for filing
the partnership or S corporation return automatically extends the time for
filing the Form MO-1NR. Form MO-1NR and Copy C of the Form MO-2NR must be filed
with the Department of Revenue either before or at the same time the
partnership or S corporation provides Copy A of the Form MO-2NR to the
nonresident partner or S corporation shareholder. Failure to do so may result
in the department disallowing the withholding claimed by the nonresident
partner of S corporation shareholder.
(B) A Form MO-2NR, Statement of Income Tax
Payments for nonresident individual partners or S corporation shareholders,
must be completed for each nonresident partner or shareholder to whom payments
or credits were made and were subject to withholding.
1. Copy C must be attached to the Form MO-1NR
when filed with the Department of Revenue.
2. Copy A of the Form MO-2NR must be provided
to each nonresident partner or S corporation shareholder to whom payments or
credits were made and were subject to withholding.
Notes
*Original authority: 143.411, RSMo 1972, amended 1993, 1997.
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