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Non Resident Taxpayer owns an interest in MO partnership.

Non Resident Taxpayer owns...

Non Resident Taxpayer owns an interest in MO partnership. Their share of income in 2017 is a small loss ($500). In 2018 they have a huge income from the sale of the MO property ($400,000+). For 2018 estimated tax purposes, per the instructions to MO form MO -2210, "Exception # 2: Tax on prior year's Income using current years rates & exemptions - This exemption applies if your 2017 (current year) tax withheld and estimated tax payments equal or exceed the tax that would have been due on your on your 2016 (prior year) income if you had computed it at 2017 (current year rates)." Does this mean we don't have to pay estimated taxes in 2018 on the huge income because the 2018 tax on the 2017 income would have been $0?

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

I called the Missouri Dept of revenue earlier. I explained the situation & they ended up telling me I could use exception one, the prior years tax exception. But in the instructions it says you have tax liability to use this exception. The taxpayer will not have a tax liability in 2017. Can I still use exception one?

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3/15/2018
Lev
Lev, Tax Advisor
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Does this mean we don't have to pay estimated taxes in 2018 on the huge income because the 2018 tax on the 2017 income would have been $0?

That is correct for all taxpayers - not only for nonresident aliens.

If your prior year tax liability was less than $500 - you will NOT be subject of underpayment penalty if you choose not to pay MO estimate taxes.

The same is correct for federal estimate taxes - but the threshold is $1000.

In such situation - the full amount of tax liability is due by Apr 15 of the following tax year.

You may choose to pay estimate taxes - that is not prohibited - but if you don't - there will not be any underpayment penalty because of prior year tax liability was zero.

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Lev
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Customer reply replied 1 month ago
Thank you. So you are saying my non resident taxpayer doesn't have to pay Missouri estimated taxes on their 2018 MO income because they are going to file a 2017 MO 1040 that just has a small loss on it from their interest in their MO partnership. Correct? & thank you again.
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The issue here - when you will calculate underpayment penalty with 2018 tax return - it will be zero even if estimated taxes were not paid BECAUSE 2017 tax liability was zero.

So that is your choice whether to pay or not to pay estimate taxes - as long as total 2018 tax liability will be fully paid by Apr 15, 2019.

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