Partnership Tax Returns

Partnerships are not liable for federal business tax. However, annual partnership returns must still be filed annually. The annual partnership tax returns include schedules showing each partner’s share of that business, which he or she uses on personal returns. Since a partnerships’ income, losses, deductions and credits pass through the partners, this income is taxed at the personal level. The United States IRS requires these returns to be filed for any US-based business and requires all partners, whether or not they are US-resident, to follow the rules. Tax authorities around the world are focused on penalizing corporate tax payers who are not compliant with domestic filing and disclosure requirements.

Who Needs to File Partnership Tax Returns

All US-based domestic or foreign partnerships must file annual tax returns with form 1065 including all schedules to include information about the partnership, income, deductions, and costs. Foreign partnerships that allocate taxable income to a foreign partner must also pay a withholding tax. In order for foreign partners to claim refunds, they must file a personal tax return with a valid Tax Payer Identification Number (TIN). It is important to ensure that foreign partners have valid TINs as the IRS requires that the withholding tax is paid for a foreign partner even if he or she does not have a valid number and is, therefore, unable to file a personal return.

How to File a Partnership Tax Return

There are several steps to completing a US-based foreign partnership tax return and due to the complicated nature of international tax law, it is wise to work with an experienced accountant who is familiar with the rules and regulations, and able to help minimize your business’s and your personal tax burden. At CST Tax Advisors we collect the appropriate documentation including:

  • Profit and loss statements
  • Details for all deductible expenses
  • A balance sheet for showing information from the beginning and the end of the year
  • Employer ID number and business codes
  • Total gross receipts, returns, and allowances
  • Information to calculate the costs of goods if your business sells products

Once the information is gathered, we prepare the appropriate forms for your general partner to sign off on If necessary, depending on the state your partnership is located in, we will also prepare your state tax returns to ensure your compliance with any state obligations such as franchise, excise, or sales tax. It is possible we may have additional questions for your partnership, but we do our best to make this process as effortless as possible for you.

There are benefits and obligations associated with every type of business structure. Partnerships certainly provide benefits but there are some points to bear in mind when it comes to filing annual partnership returns.

First, profits are taxed whether or not the partners or shareholder receive them. Profits are taxed through the partners’ personal returns and they are liable for profits of the business, even if they didn’t receive them. For more information about the tax obligations of non-resident foreign partners, see our information on personal tax returns.

Second, even though the federal government does not tax partnerships’ profits, the business may still be liable for state taxes.

You can trust CST Tax Advisors for complete assistance with Partnership Tax Returns.

Have a tax question?

We care. CST’s guiding philosophy is to understand and have empathy with our clients while providing specialist professional tax advice and services. If you need integrated cross border tax advice and compliance our renowned team is able to help you.


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