Partnerships are not liable for federal business tax. However, partnership returns must still be filed annually.
WHO PAYS TAX IN A PARTNERSHIP?
The annual partnership tax returns include schedules showing each partner’s share of that business. Each partner must declare their share of the partnership on their own personal returns.
Since a partnerships’ income, losses, deductions and credits pass through to the partners, this income is taxed at the personal level. Even if you are not a US resident, you are required to follow the rules regarding US partnerships and file any US-based business returns. US and foreign tax authorities are increasingly focused on penalizing corporate tax payers who are not compliant with domestic filing and disclosure requirements.
When we prepare your partnership tax return we can also prepare your individual tax returns. This helps us have a broad view of your tax situation to provide you with comprehensive, timely tax advice as required.
WHO NEEDS TO FILE PARTNERSHIP TAX RETURNS
USA-BASED DOMESTIC OR FOREIGN PARTNERSHIPS
All USA-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
Foreign partnerships that allocate taxable income to a foreign partner must also pay a withholding tax. If you are a foreign partner you can only claim refunds when you file a personal tax return with a valid Tax Payer Identification Number (TIN). The IRS requires that withholding tax is paid for a foreign partner even if they do not have a valid number and is, therefore, unable to file a personal return.
UNDERSTAND YOUR PARTNERSHIP TAX OBLIGATIONS
We will explain and guide you through the requirements of completing your partnership tax return and can assist with your personal tax return to ensure your tax obligations are met.
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HOW TO FILE A PARTNERSHIP TAX RETURN
There are several steps to completing a US-based foreign partnership tax return.
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 and your personal tax burden.
As part of our tax preparation service, we help you 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.
WHAT YOU NEED TO KNOW ABOUT FILING A PARTNERSHIP TAX RETURN
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.
TAXATION OF PROFITS
First, profits are taxed, whether or not the partners or shareholders 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.
STATE TAX OBLIGATION
Second, even though the federal government does not tax partnerships’ profits, the business may still be liable for state taxes.
WE GIVE YOU PEACE OF MIND
We will take care of your partnership tax return and assist with your personal tax obligations so you can focus on your business.
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ADDITIONAL SERVICES WE CAN HELP YOU WITH
TAX ADVISORY
Tax issues involve structuring, tax planning, payroll, accounts, income tax, state taxes, federal taxes, international taxes, succession planning and more. We provide proactive, tailored tax advisory services to really help your business grow.
BUSINESS TAX REVIEW
We provide you with a comprehensive business tax review to provide you with proactive, effective, and actionable tax advice for your business. This gives you the knowledge required to understand and make effective tax management decisions.
GET YOUR PARTNERSHIP AND PERSONAL TAX IN ORDER
Staying on top of your partnership tax obligations is an essential component of staying on top of your personal tax requirements. Contact us today to stay aware of your obligations.
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