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A composite return is a single return filed by a partnership, S-corporation, or Limited Liability Company (LLC) taxed as a partnership or S-corporation on behalf of two or more nonresident individuals, trusts or estates who are partners, shareholders of the S-corporation or members of the LLC.
A composite return allows S-corporations or partnerships to compute and report the South Carolina income and tax attributable to electing nonresident shareholders or partners on a single tax return. A composite return is filed using an SC1040 SC Individual Income Tax Return.
The heading states the name, address, and FEIN of the partnership, S-corporation or LLC. There is no need to use "Composite Return for" or "Shareholders/Partners of" in the name. Mark the box for filing a composite return. Mark "Single" filing status. NOTE: Corporate partners and members may not participate in composite returns.
A partnership, S-corporation, or LLC taxed as a partnership or S-corporation must compute the tax separately on each participant's share of income and add the tax together to arrive at the total tax due.
The methods available depend on whether the partner, shareholder or member has filed an
I-338 Composite Return Affidavit with the SCDOR through the partnership, S-corporation or LLC. An
I-338 affidavit states that the partner, shareholder or member has no other income taxable to South Carolina.
If a partner, shareholder or member completes an
I-338 affidavit, the composite return can either prorate the standard deduction or itemized deductions and personal exemptions for each participant or not include them.
If a partner, shareholder or member does not provide an
I-338 affidavit, the composite return must not include any personal deductions or exemptions, and must tax active trade or business income at the active trade or business income rate (5% for tax years after 2008) and all other income at 7%.
The composite return must be signed by an authorized partner, an authorized officer of the S-corporation, or an authorized member of the LLC. Attach a schedule showing the separate computations. Total the separate tax amounts and enter on Line 6, the "tax" line, of SC1040 page 2.
Nonresident fiduciaries and individuals who are shareholders or partners may participate in the filing. All participating must have the same tax year. Also refer to form
I-348, Composite Filing Instructions. S.C. Code Section
12-6-5030, SC Revenue Procedure
In order to extend the time allowed for filing a composite return, file SC4868. You must estimate the tax due and pay the tax estimate on or before the fifteenth day of the fourth month following the end of the partner’s taxable year. Place an “X” in the box for composite filers to indicate that the extension is for a composite return. This extension will allow you an additional six months to file your return.
SC 1120-T or Federal Form 7004 will not result in an extension of the composite return. For tax years after 2004, nonresident partners may participate in composite returns even if they have other sources of income taxable to South Carolina.
Disregard the other sources of income taxable to South Carolina when preparing the composite return. For more detailed information, see SC Revenue Procedure
The due date can be extended by filing an
SC8736 Request for Extension of Time to File South Carolina Return for Fiduciary and Partnership.
The SCDOR will also accept a federal Form 7004 marked for South Carolina purposes.
The request for extension automatically extends the filing due date of the return for five months. SC Code Section 12-6-4980.
Yes, notify the SCDOR of any changes in partners by sending a letter on letterhead and signed by a partner to: SCDOR, Registration/ Database Maintenance, PO Box 125, Columbia, SC 29214
NOTE: A change in ownership of greater than 50% requires all new registrations with the Department. A change of 25% or more requires a new ABL (Alcoholic Beverage Licensing) account.
A newly formed partnership should register with the SCDOR by using the
MyDORWAY Register a New Business or Tax Account feature, or by downloading and submitting the
SCDOR-111. The SC partnership file number will be assigned upon completion of the registration process. Use this number when filing the SC1065 partnership return, SC8736 partnership extension, or any correspondence pertaining to partnership income tax.
Please note: Failure to include the Federal Identification number when filing the Partnership Return, Form SC1065, could delay the processing of the return.
Every partnership (including any multiple member LLC not taxed as a corporation), domestic or foreign, doing business or owning property in South Carolina must file SC1065. Partnership income or loss is computed in the same manner and on the same basis as for an individual.
Taxpayers carrying on business in a partnership are liable for income tax in their individual capacities. Each partner's return shall include his distributive share, whether distributed or not, of the net income or loss of the partnership for the taxable year.
If a partner and partnership have different taxable years, the partner’s return shall include income or loss reported by the partnership during the partner’s taxable year.
SC1065 K-1 to each partner. Partnerships receiving passive activity income and losses from investments located within and without South Carolina must furnish partners with detailed accountings of these amounts.
Similar information must be furnished to partners who did not materially participate in the trade or business of a partnership engaged in multi-state operations. These partners may have nondeductible passive losses that cannot be used to offset interest and other business-related portfolio income apportioned to South Carolina.
There are 3 ways to make these changes:
A taxpayer whose entire business is transacted or conducted in South Carolina is subject to income tax based on the entire taxable income of the business for the taxable year. A taxpayer that transacts or conducts its business partly within and partly outside of South Carolina is subject to income tax based on the portion of its business carried on in South Carolina. This portion is determined through allocation and apportionment of income. SC Code 12-6-2220 and 12-6-2230 provide that certain classes of income, less related expenses, are allocated. The income remaining after allocation is apportioned in accordance with SC Code 12-6-2240. South Carolina generally requires the use of one of the following apportionment methods:
Print or type the legal name and address of the partnership. Both FEIN and SC File numbers are required. If the SC File number has not been assigned by the SCDOR, refer to the Registration Information included in these instructions. For FEIN information, contact the Internal Revenue Service.
Enter the county where the partnership is located.
Check the boxes that apply:
If a partnership has more than 50 partners, we request that you submit the K-1 information on a CD in any file format that is compatible with Microsoft Word or Excel.
The CD should be labeled with the following information: partnership name, Federal Employer Identification Number, SC partnership file number, and tax year.
Excel spreadsheets are also accepted. We will continue to accept paper K-1s but request the CD or spreadsheet method of reporting. Permission does not need to be obtained from this office to submit K-1s by these methods.
Payment must be made for any balance due amount calculated on the return. Make the check payable to the “SC Department of Revenue.” Write the file number or Federal Employer Identification Number (FEIN) and SC1065 and the year of the tax return” on the payment. Staple the payment to the front of the form in the indicated area.
NOTE: Refunds cannot be claimed on SC1065. An overpayment must be claimed and refunded at the partner level.
These are the partnership forms: Nonresident Shareholder or Partner Affidavit and Agreement Income Tax Withholding
Active Trade or business Income Reduced Rate Computation
Composite Return Affidavit
Composite Filing Instructions
Partnership Return SC1065
Partner's Share of South Carolina Income, Deduction, Credits, etc.
SC1065 K-1 PACK
Request for Extension of Time to File/Fiduciary and Partnership