How to File an Idaho Partnership Return

An Idaho partnership return is an informational filing used by partnerships to report their financial activities to the state. Its function is to detail the partnership’s income, deductions, gains, losses, and credits for the tax year. This information is then allocated among the partners, who are responsible for reporting it on their own income tax returns.

The partnership itself does not pay income tax at the entity level. Instead, the tax obligations “pass through” to the individual or corporate partners. The state uses the partnership return to verify that the partners have correctly reported their share of the partnership’s financial results.

Idaho Partnership Filing Requirements

A partnership must file an Idaho partnership return if it engages in business within the state or derives any income from sources in Idaho. This requirement applies regardless of the residency of the partners, as any income generated from property, transactions, or activities in Idaho triggers a filing obligation. A partnership with a partner who is an Idaho resident may also be required to file.

For partnerships operating on a calendar year, the due date for the Idaho return is April 15th. If the partnership operates on a fiscal year, the return is due by the 15th day of the fourth month after its fiscal year ends.

Idaho grants an automatic extension if the partnership has already obtained a federal extension from the IRS. This extension only applies to the filing of the return itself, not to the payment of any tax that may be due, such as withholding for nonresident partners.

Required Information and Forms for the Return

The primary document for an Idaho partnership filing is Form 65, the Partnership Return of Income. Accompanying Form 65 is the Idaho Schedule ID K-1, which must be prepared for each partner. The ID K-1 details each partner’s specific share of income, deductions, and credits, which they will need to complete their individual Idaho tax returns.

Before beginning Form 65, a partnership must have its completed federal return, Form 1065, as much of the information transfers directly. You will need the legal name, address, and federal Employer Identification Number (EIN) for the partnership. For each partner, you must gather their full name, current address, and Social Security Number (SSN) or EIN, along with their precise ownership percentage. These forms can be found on the Idaho State Tax Commission’s website.

A part of the return is accurately determining the income attributable to Idaho. For partnerships that operate only within Idaho, all of their income is considered Idaho-source income. For partnerships with operations in multiple states, Idaho’s default method for apportionment is based on a single-sales factor. Certain industries, such as electrical and telephone companies, may elect to use a three-factor formula based on property, payroll, and sales.

When completing Form 65, you will transfer the ordinary business income or loss from your federal Form 1065. The form also requires the reporting of specific Idaho additions and subtractions to income. Additions can include taxes paid to other states that were deducted on the federal return, while subtractions might involve certain types of interest income exempt from Idaho tax. The calculated Idaho-source income is then allocated to each partner on their Schedule ID K-1 according to their ownership stake.

Calculating and Paying Pass-Through Withholding

Idaho requires partnerships to withhold state income tax on behalf of their nonresident individual partners. This pass-through entity (PTE) withholding applies to each nonresident individual’s share of Idaho-source income. The purpose of this requirement is to ensure that the state collects tax on income earned within its borders, even from individuals who do not reside there.

The withholding amount is calculated by multiplying the nonresident partner’s share of Idaho-source distributable income by 5.3%. The payment of the withheld tax is submitted using Form PTE-01, while the total annual withholding is reported on Form PTE-12, a reconciliation schedule that is included with the partnership’s income tax return.

The due dates for these payments may differ from the deadline for filing the annual partnership return, and partnerships should consult the form instructions for the specific payment schedule. Certain nonresident partners may be exempt from this withholding if they meet specific criteria, such as having a minimal amount of Idaho income or being included in a composite tax return filed by the partnership.

How to Submit the Idaho Partnership Return

Once Form 65 and all related schedules are complete, the partnership must submit the return package to the Idaho State Tax Commission. There are two primary methods for filing: mail and electronic filing.

For those choosing to file by mail, the completed return must be sent to the correct address, which can be found in the Form 65 instructions. A different address is used depending on whether a payment is included with the return. The mailed package must include:

• A signed Form 65
• A complete copy of the federal Form 1065 with all its schedules
• A copy of each partner’s Idaho Schedule ID K-1
• A copy of Form PTE-12, if pass-through withholding was required

Alternatively, partnerships can file their returns electronically. This method requires the use of tax software that has been approved by the Idaho State Tax Commission. A list of approved software vendors is available on the commission’s website.