Tax Specialists for Expats & Startups in America

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We are experts in the preparation of tax returns for U.S. partnerships and foreign partnerships that are earn U.S. sourced income.

We understand the tax driven nuances that start-ups face, and whether to “check the box” or not to “check the box”. We also understand the myriad of tax filing requirements that are unique to partnerships, given that partnership tax law is the most complex area of the US tax code. With this in mind, it makes sense to have a trusted professional at your side, who understands the filing requirements and can ensure your partnership tax returns are lodged correctly and on a timely basis.

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Partnership Tax Returns

In contrast with corporations, Partnerships are not liable for federal business tax. Instead, the income and expenses associated with a partnership generally flow to each partner’s individual tax return. Annual partnership returns must be filed annually on Form 1065.

The annual partnership tax returns include forms showing each partner’s share of that business. The IRS requires these returns to be filed for any US-based business and requires all partners, whether or not they are US-resident, to follow the rules.
Who Needs to File Partnership Tax Returns?

All US-based domestic or foreign partnerships with income effectively connected with a US trade or business must file annual tax returns (Form 1065), including forms that report information about the partnership and its income and deductions. As you may have guessed, partnerships with foreign members have additional filing requirements. Partnerships that allocate taxable income to a foreign partner must also pay a withholding tax and file additional forms, such as Forms 8804, 8805, and 8813. In order for foreign partners to claim refunds on the withholding tax, they must file a personal tax return with a valid taxpayer identification number (ITIN).

What Information Do We Need to Prepare Partnership Tax Returns?

There are numerous steps to completing a partnership tax return, and due to the complicated nature of international tax law, not to mention US tax law, it is wise to work with an experienced tax preparer who is familiar with the rules and regulations, and who is able to help minimize your tax burden. At Polo Tax, we collect the appropriate documentation, including:

  • Profit and loss statements
  • Details for all deductible expenses
  • A balance sheet that shows information on assets and liabilities
  • Information to calculate the costs of goods if your business sells products

Once the information is gathered, we prepare the appropriate forms required for your partnership tax return. If necessary, depending on the state your partnership is located in, we will also prepare your state tax returns to ensure your compliance with any state obligations such as franchise, excise, or sales tax. Throughout the preparation of the returns, we do everything we can to ensure the process is as efficient and straightforward as possible for you.

What Else Do I Need to Know About Partnership Returns?

We should note that there are benefits and obligations associated with every type of business structure. Partnerships certainly provide benefits, but there are some points to bear in mind when it comes to filing annual partnership returns.

First, profits are taxed whether or not the partners or shareholders receive them. Specifically, profits are taxed when they flow through to the partners’ personal returns. Additionally, the partners are liable for profits of the business, even if they did not receive the profits.

Second, even though the federal government does not tax partnerships’ profits, the business may still be liable for state taxes, in addition to franchise or excise taxes.

Given all the tax compliance requirements and considerations your business has to make when it comes to filing partnership returns, it makes sense to have a trusted partner on your side who is well-versed when it comes to partnership tax law and the various forms that need to be completed. Moreover, it is a huge bonus to have a firm that understands international tax law and how it applies to US partnerships, in particular those with foreign members.

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