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Income 54: Shareholders of Partnerships and S Corporations



John Dundon

The Colorado Department of Revenue has finally 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 Enrolled Agent says “About Time!”

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.

Yes you will finally get caught. #TreadLightly

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Enrolled with the United States Treasury Department to practice before the IRS, governed by rules stipulated in United States Treasury Circular 230. As a Federally Authorized Tax Practitioner and a tax appeals specialist my Enrolled Agent License #85353 is issued by the United States Treasury. With this license I work for U.S. taxpayers everywhere to resolve tax matters and de-escalate stress about taxes or tax disputes for individuals and corporations with federal and state issues.

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