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partnership makes that represent

payments that are deducted by the

Part V

repayments of the partner’s own

partnership and included in the

Distributions from PA S

capital are not considered income for

partner’s income. In both situations,

Corporations

Pennsylvania personal income tax

the partnership can deduct the

purposes.

contribution made to the partner’s

HSA.

Line 12

Line 10

Contributions to a nonresident

Distributions from the

partner’s HSA for services must be

All Other Guaranteed

Pennsylvania Accumulated

apportioned.

Payments for Services

Adjustments Account

Contributions by an S corporation

Rendered (Pennsylvania-

to a 2 percent shareholder-

Enter the shareholder’s share of such

employee’s HSA for services

Apportioned Amount Only)

distributions. Nontaxable

rendered are treated the same as

distributions reduce the nonresident’s

Enter the partner’s share of such

guaranteed payments to partners for

economic investment. If liquidating

payments taxable in Pennsylvania.

services rendered and are deducted

distribution fill in the oval.

Pennsylvania taxes nonresident of

by the S corporation as wage or

Pennsylvania guaranteed payments

salary expense and included in the

Line 13

based on Pennsylvania-apportioned

shareholder-employee’s gross

calculations for ordinary income.

Distributions of Cash,

compensation. The shareholder-

Marketable Securities and

employee can deduct the contribution

Note.

The partner must know

made to the shareholder-employee’s

Property

the class of income from

HSA.

Enter the shareholder’s share of such

which the partnership made the

distributions. Nontaxable distributions

guaranteed payments. The partner

Line 11

reduce the nonresident’s economic

must then properly classify the

investment.

payments on his/her PA-40

Guaranteed Payments to a

Individual Income Tax Return.

Retired Partner

The PA S corporation should

Guaranteed payments to a retired

not include distributions to

Important.

If the total

partner must meet the exception as

Pennsylvania nonresident

guarantee payments include

described in IRC § 1402(a)(10).

shareholders from its PA C

more than one of the income classes

Generally, retirement payments

corporation earnings and profits as

described below, the partnership

received by a retired partner from a

taxable dividend income.

must provide a statement to the

partnership (of which he or she is a

partners showing the amounts for

member or former member) are

each line.

counted as net earnings from self-

Part VI

For Pennsylvania personal income

employment.

Nontaxable Income

tax purposes guaranteed payments

Certain periodic payments by a

(Loss) Owner’s Economic

are classified as follows:

partnership to a retired partner made

●

If services are rendered directly in

on account of retirement under a

Investment

the production of income from a

written plan of partnership are

business, profession, or farm, the

excluded from the tax. To be

Line 14

guaranteed payments are gross

effective, the plan must meet such

income from that income class.

Nontaxable Income or

requirements as are prescribed by

●

If services are rendered directly in

Reg §1.1402(a)-17. It must apply to

Nondeductible Expenses

the production of rental or royalty

partners generally or to a class or

Required to Calculate

income, the guaranteed payments

classes of partners, and provide such

Owner’s Economic

are gross income from that income

payments at least until the retired

Investment. Submit a

class.

partner's death.

Statement.

A guaranteed payment is

The exclusion applies to

allocable to Pennsylvania to the

retirement payments received by a

The difference between federal and

extent it is deductible from net

retired partner only if he or she

Pennsylvania depreciation should not

profits or rental and royalty income

renders no services in any business

be included on this line. Line 14 is

that is allocable to Pennsylvania.

conducted by the partnership during

based on permanent nontaxable

Income allocable to Pennsylvania is

the taxable year of such partnership,

income or nondeductible expenses in

income derived from Pennsylvania

ending within or with his or her

calculating Pennsylvania-taxable

sources.

taxable year in which amounts were

income. This amount is generally not

received. At the end of such partner-

the same amount reported on the

Health Savings Accounts

ship's taxable year, (1) there must

PA-20S/PA-65 Information Return,

be no obligation from other partners

Part IV, Line 12 because Line 12

(HSA)

to the retired partner, other than to

should not include non-permanent

Contributions by a partnership to a

make retirement payments under the

items.

bona fide partner’s HSA are not

plan, and (2) the retired partner's

The owners need this information

contributions by an employer. The

share in the capital of the partnership

to determine their personal

contributions are treated as a

had been paid to him or her in full.

Pennsylvania economic investment in

distribution of money and are not

Code Sec. 1402(a)(10)

the entity, taking into consideration

included in the partner’s income.

Reg §1.1402(a)-17.

the losses and distributions that may

Contributions by a partnership to a

partner’s HSA for services rendered,

however, are treated as guaranteed

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

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Instructions For Form Pa-20s/pa-65 - Schedule Nrk-1 - Nonresident Schedule Of Shareholder/partner/beneficiary Pass Through Income, Loss And Credits - 2012 Page 5

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