Instructions For Pa20s/pa-65 Schedule Nrk-1

Code Sec. 1402(a)(10)

Line 10

Contributions by a partnership to a

partner’s HSA for services rendered,

Reg §1.1402(a)-17.

All Other Guaranteed

however, are treated as guaranteed

Payments for Services

payments that are deducted by the

Part V

Rendered (Pennsylvania-

partnership and included in the

partner’s income. In both situations,

Apportioned Amount Only)

Distributions from PA S

the partnership can deduct the

Enter the partner’s share of such

Corporations

contribution made to the partner’s

payments taxable in Pennsylvania.

HSA.

Pennsylvania taxes nonresident of

Line 12

Contributions to a nonresident

Pennsylvania guaranteed payments

partner’s HSA for services must be

Distributions from the

based on Pennsylvania-apportioned

apportioned.

calculations for ordinary income.

Pennsylvania Accumulated

Contributions by an S corporation

Adjustments Account

to a 2 percent shareholder-

Note.

The partner must know

Enter the shareholder’s share of such

employee’s HSA for services

the class of income from

distributions. Nontaxable

rendered are treated the same as

which the partnership made the

distributions reduce the nonresident’s

guaranteed payments to partners for

guaranteed payments. The partner

economic investment. If liquidating

services rendered and are deducted

must then properly classify the

distribution fill in the oval.

by the S corporation as wage or

payments on his/her PA-40

salary expense and included in the

Individual Income Tax Return.

Line 13

shareholder-employee’s gross

compensation. The shareholder-

Distributions of Cash,

Guaranteed payments are

employee can deduct the contribution

Marketable Securities and

apportioned the same as business

made to the shareholder-employee’s

income. For example if the

Property

HSA.

guaranteed payment is $100 and the

Enter the shareholder’s share of such

Pennsylvania apportionment is 50

distributions. Nontaxable distributions

Line 11

percent, then only $50 is included in

reduce the nonresident’s economic

the business income.

Guaranteed Payments to a

investment.

Retired Partner

Important.

If the total

The PA S corporation should

Guaranteed payments to a retired

guaranteed payments include

not include distributions to

partner must meet the exception as

Pennsylvania nonresident

more than one of the income classes

described in IRC § 1402(a)(10).

shareholders from its PA C

described below, the partnership

Generally, retirement payments

corporation earnings and profits as

must provide a statement to the

received by a retired partner from a

taxable dividend income.

partners showing the amounts for

partnership (of which he or she is a

each line.

member or former member) are

For Pennsylvania personal income

counted as net earnings from self-

Part VI

tax purposes guaranteed payments

employment.

are classified as follows:

Certain periodic payments by a

Nontaxable Income

●

If services are rendered directly in

partnership to a retired partner made

(Loss) Owner’s Economic

the production of income from a

on account of retirement under a

Investment

business, profession, or farm, the

written plan of partnership are

guaranteed payments are gross

excluded from the tax. To be

income from that income class.

effective, the plan must meet such

Line 14

●

If services are rendered directly in

requirements as are prescribed by

Nontaxable Income or

the production of rental or royalty

Reg §1.1402(a)-17. It must apply to

Nondeductible Expenses

income, the guaranteed payments

partners generally or to a class or

Required to Calculate

are gross income from that income

classes of partners, and provide such

class.

payments at least until the retired

Owner’s Economic

A guaranteed payment is

partner's death.

Investment. Submit a

allocable to Pennsylvania to the

The exclusion applies to

Statement.

extent it is deductible from net

retirement payments received by a

The difference between federal and

profits or rental and royalty income

retired partner only if he or she

Pennsylvania depreciation should not

that is allocable to Pennsylvania.

renders no services in any business

be included on this line. Line 14 is

Income allocable to Pennsylvania is

conducted by the partnership during

based on permanent nontaxable

income derived from Pennsylvania

the taxable year of such partnership,

income or nondeductible expenses in

sources.

ending within or with his or her

calculating Pennsylvania-taxable

taxable year in which amounts were

income. This amount is generally not

Health Savings Accounts

received. At the end of such partner-

the same amount reported on the

ship's taxable year, (1) there must

(HSA)

PA-20S/PA-65 Information Return,

be no obligation from other partners

Contributions by a partnership to a

Part IV, Line 12 because Line 12

to the retired partner, other than to

bona fide partner’s HSA are not

should not include non-permanent

make retirement payments under the

contributions by an employer. The

items.

plan, and (2) the retired partner's

contributions are treated as a

The owners need this information

share in the capital of the partnership

distribution of money and are not

to determine their personal

had been paid to him or her in full.

included in the partner’s income.

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

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