Mississippi non-resident K-1

[BP.]

Client has several non-resident state K-1's from S-corp. I am wondering about the Mississippi one. Only $167 in ordinary income is reported. This box is checked-

Included in Composite Return. (Investor should not report this distributive share on Mississippi Non-Resident Income Tax Return.)

Is my interpretation of this statement correct- Mississippi non-resident return does not need to be filed? Thanks!

[JG EA]

TTB States tab

Part-year and nonresidents. Individuals must fi le if they receive income
taxed by Mississippi. Part-year residents are taxed on income earned
while a resident of Mississippi. Nonresidents are taxed on income earned
from Mississippi sources (excluding gambling income).

Many states have it set up this way. But if you figure it out and there is no tax it won't hurt to not file. However some states figure tax on a sliding scale and if you have any income - some of it is taxable.

Or you can leave the responsibility up to the client. I have clients that are adamant about not filing in all the states on their K-1's with little numbers. I have let them make that decision. $167 is not maybe that little. Do you have software for all the states?

[BP.]

Thank you, JG. I so appreciate you taking the time to reply. Yes, I have software for all the states.

I did prepare the Mississippi, and there is a $4.00 tax balance. And I know just what you mean about foregoing filing all the extra states on minimal income, especially considering cost of prep vs. tax amount due. But the statement I quoted (i.e.- "should not report") is what gave me pause in this instance.

These particular clients are sticklers for accuracy (non-working spouse with a self-appointed mission to account for literally each & every penny of household income/outflow) so I wanted to have confirmation of the right answers for them.

[Sue C]

If the S-Corp has done a composite return, the shareholder does not file a return. The composite return in effect files the state return for all non-resident shareholders and pays income tax at (usually) the highest marginal state tax rate. Tax usually ends up being a little more than if the shareholder filed, but you save on the headache of the extra filing for the non-resident, and the state benefits because they get the tax at the highest rate for non-residents who may have decided not to file otherwise. For more information, see page 2 (1st column) of Mississippi S-Corp return Form 85-100S.

[BP.]

You are the best, Sue C! Thanks much. (And just your 2nd post in 3 yrs!)
Cheers, Barbara

[Sue C]

I'm a professional lurker. Rarely can I contibute something new to a thread that someone else hasn't already said. But I do quite a few composite returns, so thought I would jump in.