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I live in Missouri and am 16% owner in a LLC/Partnership registered

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I live in Missouri and am 16% owner in a LLC/Partnership registered in Kansas. 2012 will be it's 2nd year with an operating loss and I have a k-1 from the business. I understand that LLC profits and losses "pass through" to me as an individual and get applied to my personal return and the LLC itself pays (maybe) some limited fees to KS but no real taxes.

My question is whether I should be filing a Kansas state return in addition to my Federal and Missouri returns. Out of curiosity, would the answer be different if this was a LLC registered in MO but does business in Kansas?
Welcome. THANK YOU for choosing Just Answer. My goal is to help make YOUR life, a little...LESS taxing.

Q: My question is whether I should be filing a Kansas state return in addition to my Federal and Missouri returns.

A: Based on the following information, the answer is no, as the LLC did not generate a profit, you do not need to complete a Kansas state tax return. SEE BELOW:


Limited liability companies (LLCs), S corporations, and partnerships (except publicly traded partnerships*) are required to withhold Kansas income tax from a nonresident owner’s share,whether distributed or undistributed, of Kansas taxable income from the LLC, S corporation, or partnership. The nonresident owner withholding rate is 6.45% of the Kansas taxable income.

REFERENCE SOURCE:

http://www.ksrevenue.org/pdf/kw-7-7s.pdf

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Q: Out of curiosity, would the answer be different if this was a LLC registered in MO but does business in Kansas?

A: No, because the LLC had a NOL. In general, most states tax non residents on income from sources within that particular state.

Please let me know if I can be of further assistance to you regarding this matter.

Thank you again for using JUST ANSWER.
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Customer: replied 3 years ago.

ok, thanks. I'm afraid I have to ask a couple follow-up questions.


 


1) If I only start filing a KS return when the profit starts, am I going to be able to file on "net" profit (taking into consideration the previous years' unfiled losses)?


 


2) When we are turning a profit, will I be effectively taxed in two states? KS as you are describing and MO as well since the k-1 income will get added to my personal return and presumably taxed in the state in which I live?

Hello again Chuck,

Q: If I only start filing a KS return when the profit starts, am I going to be able to file on "net" profit (taking into consideration the previous years' unfiled losses)?

A: When your Schedule K-1 shows a profit, this is when you need to be concerned about filing in KS. In my previous response, I referenced a KS state document that should be beneficial for you to look at. Here is the link again;

http://www.ksrevenue.org/pdf/kw-7-7s.pdf

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Q: When we are turning a profit, will I be effectively taxed in two states? KS as you are describing and MO as well since the k-1 income will get added to my personal return and presumably taxed in the state in which I live?

A: Per the referenced KS Department of Revenue document, you will be taxed on Kansas source income, and as you are a resident of MO, you will be taxed as a MO resident. No, there will be no double taxation. What happens is that your home state will credit you for taxes paid to the non-residential state. It might sound a bit confusing, but it all works out in the end if done properly. SEE BELOW:

If you have a rental home or other business in another state, you would be subject to the tax rules and taxes for that other state. Generally, you need to file tax returns in all states where you have business interests that generate taxable income.

 

We recommend you complete the tax return for your home state first, then work on any additional states you may need to file.

 

REFERENCE SOURCE:

 

http://turbotax.intuit.com/support/iq/Multiple-States/I-Have-Questions-About-State-Taxes-in-Multiple-States/GEN83627.html