AN 93(6)

1991 And 1992 Composite Returns And Composite Estimated Tax Payments For Non Calendar Year Partnerships And S Corporations

PURPOSE: The purpose of this Announcement is to explain to non calendar year partnerships and S corporations which are filing a 1991 composite return how to satisfy the 1992 tax liability of their calendar year partners or shareholders and to explain the rules for filing 1992 composite tax returns and applying 1992 composite estimated payments.

1991 COMPOSITE RETURNS: Non calendar year partnerships and S corporations that were required to file composite returns (1991 Form CT-1065 or CT-1120SI), and that made composite tax payments for their nonresident partners and shareholders, paid tax at a rate of 1.5% (the rate in effect for taxable years beginning in 1991). However, because of the rate change for taxable years beginning in 1992, partners and shareholders who file on a calendar year basis and for whom tax was paid are liable for tax calculated at a rate of 4.5%. This results in an underpayment of the correct amount due for each calendar year nonresident partner and shareholder.

In the interest of promoting efficient payment and collection of tax due and avoiding or minimizing penalties for underpayment of tax, the Department of Revenue Services strongly encourages each partnership and S corporation described in the preceding paragraph to calculate the tax due using the rate of 4.5%, and to pay the additional amount of tax on behalf of the entity's partners or shareholders.

NON CALENDAR YEAR PARTNERSHIPS AND S CORPORATIONS WHO HAVE NOT YET FILED THEIR 1991 COMPOSITE RETURNS: These entities will receive a letter from the Department requesting voluntary payment of tax at the 4.5% rate. Upon receipt of such payment, such amount will be credited to the account of the nonresident partners or shareholders relieving them from filing individual nonresident returns, provided they have no other Connecticut source income.

PARTNERSHIPS AND S CORPORATIONS WHO FILED THEIR RETURNS PRIOR TO MARCH 10, 1993 AND PAID THE TAX AT THE 1.5% RATE: These entities may have received a bill for the balance of tax due. Payment of the additional 3% tax stated on the bill is voluntary; however, such amount if paid will be credited to the account of the nonresident partners or shareholders relieving them from filing individual nonresident returns, provided they have no other Connecticut source income. Furthermore, the penalty and interest shown on the bill is in error and should be disregarded. Any penalty and interest already paid by such entities will be refunded upon request.

APPLICATION OF VOLUNTARY PAYMENTS: Partnerships and S corporations who make voluntary payment of tax should provide a list of the names and taxpayer identification numbers (social security number or federal employer identification number) of the nonresident partners or shareholders for whom the payment is made.

1992 COMPOSITE RETURN FILING REQUIREMENTS: In accordance with Conn. Gen. Stat. §12-719, as amended by section 14 of 1992 Conn. Pub. Acts 5 (June Spec. Sess.), effective for taxable years commencing on or after January 1, 1992, partnerships are no longer required to file composite returns (although they may be eligible to file group returns). The composite return requirement continues to apply to S corporations.

1992 COMPOSITE ESTIMATED TAX PAYMENTS BY PARTNERSHIPS:

In view of the elimination of the composite return filing requirement (see above), a partnership that has made a composite estimated tax payment for its taxable year commencing on or after January 1, 1992 may treat such payments as follows: (1) the partnership may apply the composite estimated tax payments to a group estimated tax payment on behalf of the same partners for whom the composite estimated tax payment was made, allocated to such nonresident partners in an amount equal to their allocated share of the composite estimated tax payment; (2) the partnership may apply the composite estimated tax payments to its nonresident partners' liability for Connecticut income tax with respect to partnership income, allocated to such nonresident partners in an amount equal to their allocated share of the composite estimated tax payment, provided the partnership provides the Department with a breakdown of the allocated amounts for each nonresident partner along with the taxpayer identification number; or (3) if neither (1) nor (2) applies, the partnership may request a refund.

Payment of group estimated tax or an individual nonresident partner's estimated tax will be considered to be timely made if the partnership applies the composite estimated tax payments in accordance with either option (1) or (2) in the preceding paragraph. In contrast, the nonresident partners who file individually risk the imposition of penalties and interest if the composite estimated tax payments are refunded to the partnership.

PLEASE NOTE THE FOLLOWING NEW INFORMATION ABOUT DRS.

FOR FURTHER INFORMATION: To order forms and publications or for further information, call the Department of Revenue Services at 860-297-5962 (Hartford area or out-of-state) or 1-800-382-9463 (in-state). Forms and publications may be ordered through voice-mail 24-hours a day by choosing Option 3 on your touch tone telephone.

Telecommunications Device for the Deaf (TDD/TT) users only call 860-297-4911 during business hours.

AN 93(6)
Income tax
Issued: 3/29/93