Instructions For Nj-1065 - Partnership Return And New Jersey Partnership Njk-1

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Instructions for NJ-1065
Partnership Return and New Jersey Partnership NJK-1
The New Jersey Gross Income Tax Act does not follow all Federal income tax provisions for
partnerships. For New Jersey gross income tax purposes, all items of income, expense, gain or loss resulting
from the activities of the partnership, regardless of the item’s character or category, must be included in the
amount reported on Form NJ-1065 as “Partnership Income” and then apportioned to each partner on Schedule
NJK-1. Each partner will report its portion of the total partnership income as “distributive share of partnership
income” on its individual tax return. Nonresident partners that have income or loss from New Jersey sources
are also required to file a tax return to report their share of partnership income. Nonresident partners will have
to attach a copy of their Schedule NJK-1 to claim credit for the tax paid on their behalf.
The partnership income information required to be reported on this form is needed to: (1) adjust certain
items of Federal income to conform to the New Jersey Gross Income Tax Act, and, (2) separate income derived
from New Jersey sources from amounts derived from all sources. These adjustments and allocations provide
the basis for the reporting of partnership income by both New Jersey resident partners and nonresident partners.
The amounts reported by the partnership on Federal Schedule K may require adjustments to ensure that all
income, expense, gain or loss is ultimately reported by the partners as distributive share of partnership income
on the New Jersey income tax return. For example, interest, dividends, rents, gains or losses earned are to be
combined with Federal ordinary income (loss) to arrive at New Jersey partnership income (loss).
If the partnership has operations outside New Jersey, all income, gain or loss derived from sources other
than real property must be allocated according to the business allocation percentage as determined by the
Business Allocation Schedule (Form NJ-NR-A) unless permission has been granted to use a substitute method
of allocation. Income, gain or loss attributable to real property that is physically located in New Jersey must be
allocated entirely to this State. If the partnership is not a “qualified investment partnership”, an “investment
club”, or is not listed on a United States national stock exchange, but it has a nonresident noncorporate or a
nonresident corporate partner and it has operations outside New Jersey, it must also complete Schedule J
"Corporation Allocation Schedule" and file it with Form NJ-1065 Partnership Return and pay any applicable
tax due. Schedule J is not required for a partnership that meets hedge fund status, if its only nonresident
partners are individuals, estates or trusts.
Partnerships that are subject to tax payments shall make installment payments of 25% of that tax on or
th
before the 15
day of each of the fourth month, sixth month and ninth month of the privilege period and on or
th
before the 15
day of the first month succeeding the close of the privilege period.
Most entities classified as partnerships for federal income tax purposes that have income or loss derived
from New Jersey sources and that have more than two owners shall make a payment of a filing fee of $150 for
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each owner up to a maximum of $250,000. The filing fee is due on or before the 15
day of the fourth month
succeeding the close of each privilege period. An installment payment equal to 50% of the current year’s filing
fee is also required at the same time.
All choices affecting the computation of income from a partnership are made by the partnership, not each
partner. This includes the choice of recognized methods of accounting, methods of computing depreciation,
capitalization of organizational fees and the use of the installment sale provisions. It also includes the
classification of income and the allocation of income to New Jersey. All partnership elections are equally
applicable to all partners.

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