How do partnerships file and pay quarterly estimated tax payments?

Tax_questionA) Partnerships are not subject to federal income tax at the entity level; instead, each partner reports their share of the partnership’s income, gains, losses, deductions, and credits on their individual tax return. However, if the partnership has income that is subject to tax, such as income from interest, dividends, or capital gains, then the partnership may need to make estimated tax payments.

To make estimated tax payments, partnerships must use Form 1065-W, which is the same form used to calculate the partnership’s quarterly estimated tax payments. The partnership must estimate its total taxable income for the year, as well as any other relevant information, such as deductions and credits, to determine its estimated tax liability.

The partnership must then divide the estimated tax liability by four and make equal payments throughout the year. The due dates for quarterly estimated tax payments are generally April 15, June 15, September 15, and January 15 of the following year. However, if any due date falls on a weekend or holiday, the due date is moved to the next business day.

Partnerships can make estimated tax payments electronically using the IRS’s Electronic Federal Tax Payment System (EFTPS), or by mailing a check with Form 1065-W to the appropriate IRS address. It’s important to note that partnerships must also file an annual partnership tax return, Form 1065, by March 15th (or the 15th day of the third month following the end of the partnership’s tax year) and provide each partner with a Schedule K-1, which reports their share of the partnership’s income, gains, losses, deductions, and credits.

According to the IRS:

  • Partnerships file Form 1065 (PDF), U.S. Return of Partnership Income, to report income and expenses.
  • A partnership does not pay tax on its income but “passes through” any profits or losses to its partners.  Generally, the partnership is required to prepare and give partners a Schedule K-1 (Form 1065) (PDF), Partner’s Share of Income, Deductions, Credits, etc.
  • The partners report the information from the K-1 on their own returns and pay any taxes due, including estimated taxes.

How to Pay Estimated Tax

Because partners are not employees of the partnership, no withholding is taken out of their distributions to pay the income and self-employment taxes on their Forms 1040 (PDF).  The partners may need to pay estimated tax payments using Form 1040-ES (PDF).

There are five ways to pay estimated tax:

  • Credit an overpayment on your 2012 return to your 2013 estimated tax.
  • Send in your payment (check or money order) with a payment voucher from Form 1040-ES.
  • Pay electronically using the Electronic Federal Tax Payment System (EFTPS)
  • Pay by electronic funds withdrawal (EFW) if you are filing Form 1040 electronically.
  • Pay by credit or debit card using a pay-by-phone system or the Internet.

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