Form It-20s - Indiana S Corporation Income Tax Return - 2014 Page 7
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32Composite Withholding Payments
Note: Passive losses may not exceed the limits imposed by
IRC Section 469. Also, losses may not exceed the shareholder’s
(Form IT-6WTH)
investment. See IRC Section 1367.
An S corporation that files a composite return must withhold Indiana
state and/or county income taxes from all nonresident individual
Other Shareholders
shareholders regardless of whether or not they have opted out of the
Other shareholders that are trusts or estates report their distributive
composite filing. Amounts withheld from nonresident individual
shares of the S corporation income (loss) on Form IT-41. All
shareholders included in the composite return may be remitted into
distributions are fully taxable for income tax purposes. For adjusted
the corporate account using Form IT-6WTH. Payment is due the
gross income, taxable S corporation income includes pro rata Indiana
15th day of the 4th month following the close of the S corporation’s
modifications. However, losses may not exceed the limits imposed by
tax period. To make additional payments, please contact the
IRC Sections 469 and 1367.
department at (317) 232-0129 for an additional Form IT-6WTH. The
total payments are claimed as a credit on line 18 of Form IT-20S.
Shareholders doing business both within and outside Indiana
must also determine their taxable income from Indiana sources
Shareholders’ Liability and Filing
by using the allocation and apportionment provisions contained
in IC 6-3-2-2(b)-(h). See Schedule E (apportionment) for more
Requirements
information. Business income, including all S corporation income,
A shareholder’s share of profit or loss from an S corporation is
apportioned to Indiana plus nonbusiness income allocated to Indiana
included in the shareholder’s calculation of federal AGI. It is
(plus modifications required by IC 6-3-1-3.5(a) for adjusted gross
generally subject to the same rules for arriving at Indiana AGI.
income tax) equals the taxpayer’s net taxable income for Indiana tax
Therefore, a shareholder’s distributive share, before any modifications
purposes.
required by Indiana statutes, is the same ratio and amount as
determined under IRC Section 1361 and its prescribed regulations.
Basis of Stock in an S Corporation
The shareholders include their share of all S corporation income,
For Indiana income tax purposes, the basis of the shareholder’s
whether distributed or undistributed, on their separate or individual
stock in an S corporation is generally the same as its basis for federal
Indiana income tax returns. Each shareholder’s distributive share of
income tax purposes. Shareholders of S corporations must maintain
income is adjusted by modifications provided for in IC 6-3-1-3.5(a)
basis schedules and make them available to the department upon
or (b).
request.
Individual Shareholders
Indiana S Corporation Income for Individual
Residents – A resident shareholder reports the entire distributive
Shareholders
share of S corporation income (loss) as adjusted, no matter where
Example:
the S corporation’s business is located or in which state(s) it does
Taxpayer A is a resident of Indiana and has a 50% stock interest
business. Form IT-40 (Indiana Individual Income Tax Return)
in XYZ, Inc. XYZ is an Indiana S corporation doing business both
should be completed by each individual shareholder.
within and outside Indiana. Taxpayer B is a nonresident of Indiana
but also has a 50% stock interest in XYZ, Inc.
Nonresidents – If the nonresident individual shareholder has filed
the IN-COMPA affidavit with the S corporation to opt out of the
XYZ’s income from operations is $530,000, and its expenses are
composite filing, he must complete Form IT-40PNR. The shareholder
$500,000. Of these expenses, $35,000 is an expense for state income
must claim credit on that return by enclosing state Form WH-18 for
tax.
amounts withheld by the S corporation from his distributive share of
income. The withholding will be paid into a nonresident withholding
Computations for XYZ, Inc.:
account, and the shareholder will be issued a WH-18 only if the
XYZ computes its adjusted S corporation income as follows:
individual has opted out of the composite filing. The IN K-1 will
Income from operations
$530,000
be used to replace a WH-18 if the withholding was paid into the
Expenses
-500,000
corporate account by using an IT-6WTH. The shareholder must claim
Addback modifications
+ 35,000
credit on that return by enclosing state Form WH-18 for amounts
S corporation income
$65,000
withheld by the S corporation from the shareholder’s distributive
share of income. Nonresident shareholders are exempt from the filing
Using the single-factor apportionment formula for periods beginning
requirements of an Indiana individual income tax return only if they
after Dec. 31, 2010, XYZ, Inc., determines its apportionment
are included as members of a composite return.
percentage as follows:
A part-year nonresident shareholder must file Form IT-40PNR to
Indiana sales/receipts
$5000.00
report:
Divide by everywhere sales/receipts
/41667.00
•
The total amount of income (loss) received while residing in
Equals
.1200
Indiana;
Multiply by 100
x 100
•
That part of Indiana source income received while a
Equals Indiana apportionment percentage
12.00%
nonresident; and
•
Apportioned Indiana income (loss), as modified, received
by a nonresident of Indiana.
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