17 Jan Nonresident Partners and Shareholders of Partnerships and S Corps
The Colorado Department of Revenue revised its guidelines in FYI Income 54 regarding people who do not live in Colorado but are partners and/or shareholders of partnerships and/or S corporations in Colorado, ensuring that pass-through entities pay Colorado income tax on their Colorado-source income. This post breaks down Nonresident Partners and Shareholders of Partnerships and S Corps.
According to the revised guidelines, this requirement is satisfied in one of three ways. The pass-through entity can:
- Include the nonresident member in a composite return the pass-through entity files (Form 106) and make a composite payment of tax on the nonresident’s behalf;
- File with its Form 106 a signed agreement from the nonresident member via Form DR 0107 by which the nonresident member agrees to file their own individual Colorado income tax return to report and pay any tax the nonresident member owes; or
- Withhold and remit the applicable tax on the nonresident member’s behalf via Form DR 0108.
If you do not live in Colorado and do not elect to be included in a composite return OR sign an agreement to file you own Colorado income tax return, your pass-through entity must withhold and remit the applicable tax on your behalf using Form DR 0108. The appropriate box in Part III of Form 106 must be checked to indicate which option has been selected for each partner that does not live in Colorado.
Colorado statutes and regulations
- § 39-22-601(2.5), C.R.S. (S corporations)
- § 39-22-601(5), C.R.S. (partnerships)
- § 39-22-605, C.R.S. and Dept. Rule 39-22-605 (estimated payment requirement for individuals)
- § 39-22-608, C.R.S. and Dept. Rule 39-22-608 (due date for returns)
- § 39-22-609, C.R.S. (due date for payment of tax)
Colorado forms and guidance
- Form 106 (Income Tax Return for Pass-Through Entities and Composite Filing for Nonresidents)
- Form DR 0107 (Colorado Nonresident Partner, Shareholder or Member Agreement)
- Form DR 0108 (Statement of Colorado Tax Remittance for Nonresident Partner, Shareholder or Member)
For more on Nonresident Partners and Shareholders of Partnerships and S Corps contact me.