Question

K-1

Forum|Forum|4 years ago
March 23, 2022
3 replies
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I own stock in an S Corporation in Iowa but I live in Missouri. Is it necessary for me to file an Iowa tax return or can I include the income in my Missouri return as I do with all the other stock I own?

DaveF1006

To clarify, how are the income transaction reported to you?

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M

mgrooteAuthor

They are reported to me as Iowa source income.

DaveF1006

To clarify, how are the income transaction reported to you?

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M

Mike9241

where is business conducted? this can be complicated if you are physically located in one state but sell in other states. other things states look at do you store inventory in that state? do you have a sales office in that state? do you have sales reps the actually meet personally with customers or potential customers in that state? the rules vary from state to state.

M

mgrooteAuthor

I only on stock in the business. Dividends come to me at my home in Missouri. The business is an Iowa S-Corporation. I have no personal involvement in managing the business. What other information do you need?

Rick19744

Employee

Your facts are limited, but I will provide some comments:

An S corporation is a pass-through entity and all income, loss, gain, etc is allocated to each shareholder in proportion to their ownership.
Each year you will receive a K-1 and input the applicable K-1 line items into TT
As an S corporation shareholder, you need to maintain a basis in your S corporation stock. This is key.
Not sure how you maintained your S corporation basis in the past, but new this year is form 7203. This form was developed, albeit overly complicated, to provide some consistency in tracking basis.
As a Missouri resident, you will report all K-1 income on your Missouri tax return.
In the past, pre 2022, Iowa required either Iowa withholding on a nonresident shareholder or the S corporation could file a composite tax return for nonresident shareholders.
If you had Iowa withholding remitted on your behalf, then you would need to file a nonresident Iowa tax return.
If you were included in a composite tax return, then you would not need to file an Iowa nonresident tax return.
For tax years 2022 and after, Iowa is eliminating the withholding and mandating all nonresident shareholders be included in a composite tax return. As a result, for 2022 and after, you will not be required to file an Iowa tax return.
If the S corporation had nexus (doing business in a state), other than Iowa it is the responsibility of the S corporation to make the shareholders aware of this. This would be done through either another state K-1, another state withholding, another state composite return, etc.
To avoid any double tax, you will receive a credit for taxes paid to another state on your Missouri tax return.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.