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Tax Services

Tax Services

Taxes Paid by Partnerships


A partnership is a business operated by several owners, called partners. This kind of business is considered a “pass-through” entity, because the taxes of the partnership are passed through to the owners on their personal tax returns.

Taxes Paid by a Partnership are Mentioned Below


We prepare all types of partnership taxes in our office. A partnership is a business operated by multiple owners, known as partners. This type of business is considered a “pass-through” entity, because the taxes of the partnership are passed to the owners on their personal tax returns.
  • General Question
No. The current aggregate theory approach is continued and partnership items of receipts, income, gain, loss, and deduction, including attributes related to payroll and property factors, flow through a partnership to a corporate partner.
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The credit carryforward provisions were included in the new Subchapter 3-A. Any credit carried forward from a year prior to corporate tax reform may continue to be carried forward and used against the tax imposed under Subchapter 3-A in tax years 2015 and after, under the same rules that applied prior to reform.

Credits with carryforwards of unlimited duration can continue to be carried forward until used
Credits with carryforwards of a limited duration can be carried forward and used until their expiration.
Example:
A taxpayer, who relocated in 2008, was allowed a $3,000 Lower Manhattan Relocation and Employment Assistance tax credit in 2013 that has a 5-year carryforward duration. The taxpayer used $1000 in 2013 and $500 in 2014. The unused credit carryforward of $1,500 may continue to be carried forward until 2018, or whenever it is completely used, whichever comes first. Further, the twelve year benefit period also carries over into Subchapter 3-A.
The tax rate applicable to a qualified New York manufacturing corporation depends upon both the amount of its business income allocated to the City and the amount of its total business income prior to allocation. Administrative Code sections 11-654(1)(k)(1), (2) and (3) require separate alternative tax rate calculations using each amount. To determine its applicable tax rate, the corporation must, first, calculate its tax rate with reference to business income allocated to the City, second, calculate its tax rate with reference to business income prior to allocation, and, third, select the highest rate resulting from these calculations. Each calculation is necessary even if the corporation’s allocated business income is less than $10 million. Accordingly, the tax rate based on total business income prior to allocation sets a minimum, not a maximum, tax rate. No tax rate reduction applies at all if the corporation’s income allocated to the City is $20 million or greater or its business income prior to allocation is $40 million or greater.

Example A:
A qualified New York manufacturing corporation has $15 million of business income allocable to the City and $25 million of total business income. It must calculate alternative tax rates using each amount of income. The applicable tax rate is 6.638% because:
Tax rate based on business income allocated to the City. 4.425% + (4.425% x ([$15 million - $10 million] / $10 million)) = 6.6375% (round to 6.638%),
Tax rate based on total business income prior to allocation. 4.425% + (4.425% x ([$25 million -
$20 million] / $20 million)) = 5.53125% (round to 5.531%), and
The higher rate is 6.638%.

Example B:
A qualified New York manufacturing corporation has $15 million of business income allocable to the City and $35 million of total business income. It must calculate alternative tax rates using each amount of income. The applicable tax rate is 7.744% because:
Tax rate based on business income allocated to the City. 4.425% + (4.425% x ([$15 million - $10 million] / $10 million)) = 6.6375% (round to 6.638%),
Tax rate based on total business income prior to allocation. 4.425% + (4.425% x ([$35 million -
$20 million] / $20 million)) = 7.74375% (round to 7.744%), and
The higher rate is 7.744%.

Example C:
A qualified New York manufacturing corporation has $15 million of business income allocable to the City and $41 million of total business income. The applicable tax rate is 8.85% because total business income is $40 million or greater.

Example D:
A qualified New York manufacturing corporation has $25 million of business income allocable to the City and $25 million of total business income. The applicable tax rate is 8.85% because business income allocated to the City is $20 million or greater.

Example E:
A qualified New York manufacturing corporation has $8 million of business income allocable to the City and $25 million of total business income. It must calculate alternative tax rates using each amount of income.
The applicable tax rate is 5.531% because:

Example F:
A qualified New York manufacturing corporation has $8 million of business income allocable to the City and $15 million of total business income. It must calculate alternative tax rates using each amount of income. The applicable tax rate is 4.425% because:
The City intends to issue rules that generally correspond to the regulations New York State will issue under Article 9-A of the Tax Law to implement corporate tax reform, in so far as the underlying statutes themselves correspond. The City will make draft regulations available after the State has finalized its new and revised regulations and indicates that it will initiate adoption under the formal New York State Administrative Procedures Act. As they are developed, drafts of various regulatory amendments will be posted to the New York State Department of Taxation and Finance website for public comment. These draft regulatory amendments are not final and should not be relied upon.
A large corporation is one that had, or whose predecessor had, business income allocated within the City, of at least $1 million for any of the three tax years immediately preceding the tax year for which the exception is being sought. See, Administrative Code § 11-676(5)(a).

Federal and State Income Taxes

Since the partnership income is passed through to the owners, every owner must report his or her % share of income on the individual Form Taxes Paid by: 

Since the partnership income is passed through to the owners, every owner must report his or her percentage share of income on the individual Form 1040 for federal income taxes.

-) First of all, the partnership files an information-only return on Form 1065 & submits it to the IRS.
-) Then every partner’s share of the profit or loss of the partnership is recorded on a Schedule K-1.
-) The K-1 information for all partner are reported on Line 17 of the partner’s Form 1040.

Most of the states use the federal information to figure out total income for state tax determination. 

Self Employment Taxes

Partners are considered self-employed individuals (not employees). Every partner must pay self-employment taxes based on the information on Schedule K-1, indicating his or her share of the income of the partnership. Self-employment tax is included in each partner’s Form 1040 for federal taxes, calculated using Schedule SE, and the total self-employment tax liability is included on line 57 of Form 1040.

Other Employment Taxes

If a partnership has employees, the business have to pay employment taxes, including withholding & reporting federal & state income taxes, paying & reporting FICA (Social Security & Medicare) taxes, worker’s compensation taxes & unemployment taxes.

Property Taxes

If the partnership owns a building or other real property, property taxes are must to be paid on this property.

State Sales, Excise & Franchise Taxes

Partnerships are required to pay state sales taxes & excise taxes in the exact same manner as all other business types. Check within state department of revenue for more knowledge on sales and excise taxes. Partnerships are not generally liable for franchise taxes, as these are levied by states on corporations.

1040 for Federal Income Taxes

-) The partnership files an information-only return on Form 1065 and than submits it to the IRS.
-) Then each of the partner’s share of profit/loss of the partnership is recorded on a Schedule K-1.
-) K-1 information for every partner is reported on Line 17 of the partner’s Form 1040.

Most of the states utilizes the federal information to figure out total income for state tax determination.

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