How to Prepare and File a PA Partnership Return

A partnership operating in Pennsylvania is a pass-through entity, meaning the business itself does not pay income tax. Instead, income, losses, deductions, and credits are “passed through” to the individual partners. The partnership must report this financial activity to the state by filing an annual information return. This return details the entity’s financial results and their distribution to each owner.

PA Partnership Filing Requirements

A partnership must file a Pennsylvania information return if it engages in business activities or earns income from sources within the state. This filing obligation also applies to any partnership with a Pennsylvania resident partner, regardless of where the business operates or earns income.

For calendar-year partnerships, the deadline to file the PA-20S/PA-65 Information Return is March 15. Fiscal-year filers must submit their return by the 15th day of the third month after the close of their fiscal year.

If a partnership cannot meet the filing deadline, an extension can be secured. Pennsylvania grants an automatic five-month extension to file if the partnership has already filed for a federal extension using Form 7004 with the IRS. This is an extension of the time to file the informational return, not an extension to pay tax. The payment for any nonresident withholding tax is due by the 15th day of the fourth month following the end of the tax year, which is April 15 for calendar-year filers.

Preparing the PA Partnership Return

The primary document for a partnership’s state filing is the PA-20S/PA-65, Pennsylvania S Corporation/Partnership Information Return. To complete it, the partnership must first have a completed copy of its federal Form 1065, U.S. Return of Partnership Income. The federal return provides the foundational figures that will be adjusted for Pennsylvania tax law.

In addition to the federal return, preparers will need the following information:

• The partnership’s full legal name, federal Employer Identification Number (EIN), and business activity code
• The full name, address, and Social Security Number or EIN for every partner
• Each partner’s specific ownership percentage held during the year
• A complete balance sheet showing the partnership’s financial position at the beginning and end of the tax year

For partnerships operating in multiple states, income must be apportioned to Pennsylvania. The partnership must provide this apportionment information to its partners. Nonresident and corporate partners may need to use a three-factor formula based on property, payroll, and sales to apportion their share of the partnership’s income.

Partnerships are required to withhold and remit tax on behalf of any nonresident partners. This withholding is calculated on the nonresident partner’s share of income sourced to Pennsylvania. The partnership is responsible for calculating this amount, paying it to the Department of Revenue, and reporting it on the PA-20S/PA-65 return.

Other schedules are often required as attachments. A PA Schedule K-1 must be prepared for every partner, detailing their specific share of income and deductions. Another common attachment is the PA Schedule M, which reconciles the partnership’s federal net income to its net income under Pennsylvania’s tax rules, accounting for differences like the add-back of state taxes.

How to File and Pay

After completing the PA-20S/PA-65 and all schedules, the partnership must submit the package to the Department of Revenue. The primary method is electronic filing through the state’s myPATH online portal or approved third-party software, which involves uploading the completed return package. Tax preparers who file 11 or more partnership returns are required to file them electronically.

Alternatively, partnerships can file a paper return by mail. The completed return package should be mailed to the address specified in the form instructions. When filing by mail, it is advisable to use a mailing service that provides proof of delivery.

If the partnership has a nonresident withholding tax liability, the payment must be submitted separately from the return. Payments can be made electronically through the myPATH system or via Electronic Funds Withdrawal. To pay by mail, a check or money order can be sent with the PA-20S/PA-65 V payment voucher. Payments of $1,000 or more must be made electronically.

After submitting the return, the partnership should retain a complete copy of the filed documents and confirmation of submission. For electronically filed returns, the preparer must also keep the signed authorization form, PA-8879C/P, on file. This form should not be mailed but must be available if requested, as these records are important for verifying compliance.

Understanding the Partner’s PA Schedule K-1

Each partner receives a PA Schedule K-1 from the partnership. This document is personalized for each partner and breaks down their specific share of the partnership’s income, losses, deductions, and credits. It separates income into different classes as defined by Pennsylvania tax law.

The information on the PA Schedule K-1 is used by the partner to complete their Pennsylvania Personal Income Tax Return (PA-40). Partners must report their share of the entity’s income on their personal returns, regardless of whether they received a cash distribution. The figures from the K-1 are transferred to the appropriate lines and schedules of the PA-40 to ensure the income is properly taxed.