Mo. Code Regs. tit. 12 § 10-2.190

Current through Register Vol. 49, No.12, June 17, 2024

Section 12 CSR 10-2.190 - 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.

12 CSR 10-2.190

AUTHORITY: section 143.411, RSMo Supp. 1997.* Original rule filed March 15, 1989, effective Sept. 11, 1989. Emergency amendment filed Sept. 14, 1994, effective Sept. 24, 1994, expired Jan. 21, 1995. Emergency amendment filed Dec. 20, 1994, effective Jan. 22, 1995, expired May 21, 1995. Amended: Filed Sept. 14, 1994, effective April 30, 1995. Amended: Filed March 1, 1996, effective Aug. 30, 1996. Amended: Filed Dec. 31, 1997, effective June 30, 1998.

*Original authority: 143.411, RSMo 1972, amended 1993, 1997.