Instructions For Pa20s/pa-65 Schedule Rk-1

Reg §1.1402(a)-17.

recipients to the extent derived from

Contributions by a partnership to

their own capital. The distributions

a partner’s HSA for services

that the partnership makes that

rendered, however, are treated as

represent repayments of the

guaranteed payments that are

Part V

partner’s own capital are not

deducted by the partnership and

considered income for Pennsylvania

included in the partner’s income. In

Distributions from PA S

personal income tax purposes.

both situations, the partnership can

Corporations

deduct the contribution made to the

Line 12

partner’s HSA.

Line 14

Contributions to a nonresident

All Other Guaranteed

partner’s HSA for services must be

Distributions from the

Payments for Services

apportioned.

Pennsylvania Accumulated

Rendered

Contributions by an S corporation

Adjustments Account

Enter the partner’s share of such

to a 2 percent shareholder-

Enter the shareholder’s share of such

payments. Typically, guaranteed

employee’s HSA for services

distributions. If a liquidating

payments to partners are paid to the

rendered are treated the same as

distribution, fill in the oval. If the

extent the services are rendered

guaranteed payments to partners for

amount is in excess of basis it must

directly in the production of income

services rendered and are deducted

be reported on the shareholder’s

from a business, profession or farm,

by the S corporation as wage or

return as taxable gain on PA-20S/PA-

and/or from rental or royalty income.

salary expense and included in the

65 Schedule D.

shareholder-employee’s gross

Note.

compensation. The shareholder-

The partner must know

Line 15

employee can deduct the contribution

the class of income from

made to the shareholder-employee’s

Distributions of Cash,

which the partnership made the

HSA.

guaranteed payments. The partner

Marketable Securities and

must then properly classify the

Property

Line 13

payments on his/her PA-40

Enter the shareholder’s share of such

Individual Income Tax Return.

Guaranteed Payments to a

distributions. This line will include the

total of cash and the fair market

Retired Partner

Important.

If the total

value of all marketable securities and

Guaranteed payments to a retired

guaranteed payment includes

property distributed to the

partner must meet the exception

more than one of the income classes

shareholder.

described in IRC § 1402(a)(10).

described below, the partnership

Generally, retirement payments

must provide a statement to the

The PA S corporation includes

received by a retired partner from a

partners showing the amounts for

distributions to Pennsylvania

partnership (of which he or she is a

each line.

resident shareholders from its

member or former member) are

For Pennsylvania personal income

PA C corporation earnings and profits

counted as net earnings from self-

tax purposes guaranteed payments

as taxable dividend income on the

employment. Certain periodic

are classified as follows:

PA-20S/PA-65 Schedule RK-1, Part

payments by a partnership to a

●

If services are rendered directly in

II, Line 3.

retired partner made on account of

the production of income from a

retirement under a written plan of

business, profession, or farm, the

partnership are excluded from the

Part VI

guaranteed payments are gross

tax. To be effective, the plan must

income from that income class.

meet such requirements as are

Nontaxable Income

●

If services are rendered directly in

prescribed by Reg §1.1402(a)-17.

(Loss) In Owner’s Basis

the production of rental or royalty

It must apply to partners generally or

income, the guaranteed payments

Line 16

to a class or classes of partners, and

are gross income from that income

provide such payments at least until

Nontaxable Income or

class.

the retired partner's death.

Nondeductible Expenses

A guaranteed payment is

The exclusion applies to

Required to Calculate

allocable to Pennsylvania to the

retirement payments received by a

extent it is deductible from net

Owner’s Basis. Submit a

retired partner only if he or she

profits or rental and royalty income

Statement

renders no services in any business

that is allocable to Pennsylvania.

conducted by the partnership during

The difference between federal and

Income allocable to Pennsylvania is

the taxable year of such partnership,

Pennsylvania depreciation should not

income derived from Pennsylvania

ending within or with his or her

be included on this line. Line 16 is

sources.

taxable year in which amounts were

based on permanent nontaxable

received. At the end of such

income or nondeductible expenses in

Health Savings Accounts

partnership's taxable year, (1) there

calculating Pennsylvania-taxable

(HSA)

must be no obligation from other

income. This amount is generally not

Contributions by a partnership to a

partners to the retired partner, other

the same amount reported on the

bona fide partner’s HSA are not

than to make retirement payments

PA-20S/PA-65 Information Return,

contributions by an employer. The

under the plan, and (2) the retired

Part IV, Line 12 because Line 12

contributions are treated as a

partner's share in the capital of the

should include non-permanent items.

distribution of money and are not

partnership had been paid to him or

Submit a statement that includes

included in the partner’s income.

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

the entity’s name, entity’s federal

Instructions For Pa20s/pa-65 Schedule Rk-1 - 2013 Page 5

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