Instructions For Pa-20s/pa-65 Schedule Nrk-1

ending within or with his or her

income or nondeductible expenses in

Health Savings Accounts

taxable year in which amounts were

calculating Pennsylvania-taxable

received. At the end of such

income. This amount is generally not

(HSA)

partnership's taxable year, (1) there

the same amount reported on the

Contributions by a partnership to a

must be no obligation from other

PA-20S/PA-65 Information Return,

bona fide partner’s HSA are not

partners to the retired partner, other

Part IV, Line 12 because Line 12

contributions by an employer. The

than to make retirement payments

should not include non-permanent

contributions are treated as a

under the plan, and (2) the retired

items.

distribution of money and are not

partner's share in the capital of the

The owners need this information

included in the partner’s income.

partnership had been paid to him or

to determine their personal

Contributions by a partnership to a

her in full. Code Sec. 1402(a)(10)

Pennsylvania economic investment in

partner’s HSA for services rendered,

Reg §1.1402(a)-17

the entity, taking into consideration

however, are treated as guaranteed

the losses and distributions that may

payments that are deducted by the

exceed their economic investment.

partnership and included in the

Part V

Submit a statement and provide a

partner’s income. In both situations,

breakdown of all nontaxable income

the partnership can deduct the

Distributions from PA S

earned and all non-deductible

contribution made to the partner’s

Corporations

expenses not taken. This amount

HSA.

should only include permanent

Contributions to a nonresident

differences needed to calculate the

Line 12

partner’s HSA for services must be

owner’s economic investment in the

apportioned.

Distributions from the

entity. If reporting a loss fill in the

Contributions by an S corporation

Pennsylvania Accumulated

oval.

to a 2 percent shareholder-

The entity provides the owners

Adjustments Account

employee’s HSA for services

with this information so the owners

Enter the shareholder’s share of such

rendered are treated the same as

can calculate their economic

distributions. Nontaxable

guaranteed payments to partners for

investment. Examples of nontaxable

distributions reduce the nonresident’s

services rendered and are deducted

income are tax-exempt interest,

economic investment. If liquidating

by the S corporation as wage or

gifts, inheritance, loan proceeds,

distribution fill in the oval.

salary expense and included in the

insurance proceeds and federal tax

shareholder-employee’s gross

refunds. Examples of nondeductible

Line 13

compensation. The shareholder-

expenses are partner's retirement

employee can deduct the contribution

Distributions of Cash,

contributions, partner’s life and

made to the shareholder-employee’s

Marketable Securities and

health insurance premiums.

HSA.

These items may be listed on

Property

federal Form 1120S Schedule K as

Enter the shareholder’s share of such

Line 11

“Items Affecting Shareholder Basis”

distributions. Nontaxable

Guaranteed Payments to a

and on federal Form 1065 Schedule K

distributions reduce the nonresident’s

as “Other Information”.

Retired Partner

economic investment.

Guaranteed payments to a retired

partner must meet the exception as

The PA S corporation should

Part VII

described in IRC § 1402(a)(10).

not include distributions to

Generally, retirement payments

Pennsylvania nonresident

Supplemental

received by a retired partner from a

shareholders from its PA C

Information

partnership (of which he or she is a

corporation earnings and profits as

The owners need this information to

member or former member) are

taxable dividend income.

determine their personal

counted as net earnings from self-

Pennsylvania economic investment in

employment.

the entity. Lines 15 through 18 are

Part VI

Certain periodic payments by a

for information purposes only.

partnership to a retired partner made

Nontaxable Income

on account of retirement under a

(Loss) Owner’s Economic

Line 15

written plan of partnership are

Investment

excluded from the tax. To be

Owner’s Share of IRC § 179

effective, the plan must meet such

Allowed According to

requirements as are prescribed by

Line 14

Pennsylvania Rules

Reg §1.1402(a)-17. It must apply to

Nontaxable Income or

(Pennsylvania-Apportioned

partners generally or to a class or

Amount Only)

Nondeductible Expenses

classes of partners, and provide such

payments at least until the retired

Enter the owner’s share of IRC § 179

Required to Calculate

partner's death.

depreciation expense. Each entity

Owner’s Economic

The exclusion applies to

and individual taxpayer is limited to

Investment. Submit a

retirement payments received by a

$25,000 of IRC § 179 depreciation

Statement.

retired partner only if he or she

expense. Do not deduct this amount

The difference between federal and

renders no services in any business

from any income class. The amount

Pennsylvania depreciation should not

conducted by the partnership during

is used to verify that the owner has

be included on this line. Line 14 is

the taxable year of such partnership,

not exceeded the Pennsylvania limit.

based on permanent nontaxable

Instructions for PA-20S/PA-65 Schedule NRK-1

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Instructions For Pa-20s/pa-65 Schedule Nrk-1 - 2011 Page 5

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