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Are partnerships required to file a Wisconsin partnership return?
A partnership or limited liability company treated as a partnership with income from Wisconsin sources, regardless of the amount, must file
Form 3, Wisconsin Partnership Return. For example, a partnership must file a return if it has income from any of the following:
- Business transacted in Wisconsin,
- Personal or professional services performed in Wisconsin,
- Real or tangible personal property located in Wisconsin,
- Wisconsin lottery prizes, including income from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in Wisconsin, or
- A covenant not to compete, if that covenant was based on a Wisconsin-based activity
Exceptions:
- A syndicate, pool, joint venture, or similar organization that isn't required to file a federal partnership return because it has elected under sec.
761(a), Internal Revenue Code (IRC) not to be treated as a partnership for federal income tax purposes may make a similar election for Wisconsin purposes. To make the election, include a copy of the federal election statement to the Form 3 filed with the department for the year of election.
- If the Wisconsin election is made, the organization generally won't have to file Form 3 except for the year of election. However, the department may require the organization to file a return so that a partner's Wisconsin tax liability may be computed.
- Limited liability companies treated as corporations for federal income tax purposes must file a Wisconsin corporation franchise or income tax return,
Form 4,
Wisconsin Non-Combined Corporation Franchise or Income Tax Return,
Form 5S,
Wisconsin Tax-Option (S) Corporation Franchise or Income Tax Return, or
Form 6,
Wisconsin Combined Corporation Franchise or Income Tax Return, instead of Form 3.
- Publicly traded partnerships treated as corporations under sec.
7704, IRC, must file a Wisconsin corporation franchise or income tax return, Form 4 or 6, instead of Form 3.
- Single member limited liability companies that are disregarded as separate entities under sec. 7701, IRC, are disregarded as separate entities for Wisconsin purposes. The member is required to include the income and expenses of the limited liability company on the member's return.
- Common trust funds are treated as fiduciaries under Wisconsin law and must file
Form 2,
Wisconsin Fiduciary Income Tax for Estates and Trusts, instead of Form 3.
Note: The department may require a partnership with Wisconsin resident partners to file a Wisconsin partnership return even though it has no Wisconsin business or income so that a Wisconsin resident partner's tax liability may be computed.
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May a partnership pay tax at the entity level?
For taxable years beginning January 1, 2019, provisions in
2017 Wis. Act 368, provide partnerships an election to pay tax at the entity level under sec.
71.21(6)(a), Wis. Stats. If a partnership makes the election to pay tax at the entity level, the partners may not include any items of income, gain, loss, or deduction on their Wisconsin tax return.
The partnership must check box "I" on page 1 of Form 3 and include a completed
Schedule 3-ET,
Entity-Level Tax Computation, with Form 3. For additional information detailing the entity-level tax election, see
Pass-Through Entity-Level Tax: Partnerships common questions and
Schedule 3-ET instructions located on the department's website.
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If a partnership receives an IRS adjustment at the entity level under the Bipartisan Budget Act of 2015 (Public Law 114-74), can the partnership request to pay tax at the entity level for Wisconsin?
Yes, the partnership may request to pay tax at the entity level within 60 days after the final determination by the Internal Revenue Service as provided in sec.
71.76(2)(b), Wis. Stats.
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If the department approves the request
- Within 180 days from the date the department approves the request, the partnership must amend the partnership returns and pay tax on behalf of the partners at the highest tax rate computed under sec.
71.745, Wis. Stats., for each reviewed year, as defined under section 6225 of the Internal Revenue Code.
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If the department denies the request
- The partnership
may not pay tax on behalf of the partners
- Within 180 days from the date the department denies the request, the partnership and its pass-through members must file amended returns for each reviewed year, as defined under section 6225 of the Internal Revenue Code.
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After receiving an IRS adjustment at the entity level, how does a partnership request to pay tax at the entity level to Wisconsin?
- The entity must make the request in writing within 60 days after the final determination by the IRS and send to:
- The request must include the following:
- A statement that the taxpayer has been audited by the IRS and wants to pay tax at the entity level pursuant to sec. 71.76(2)(b), Wis. Stats.
- A complete copy of the IRS audit report
- If changing the pass-through entity representative, completed Form PT-R,
Pass-Through Entity Representative
- Power of Attorney, if applicable
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How does a partnership report a Wisconsin adjustment if an administrative adjustment request is made under sec. 6227 of the Internal Revenue Code?
If a partnership makes an administrative adjustment request under sec. 6227 of the Internal Revenue Code (IRC), the following requirements as provided under sec. 71.76(1), Wis. Stats., apply:
- The partnership and its partners must file an amended Wisconsin return for each reviewed year, as defined under sec. 6225, IRC, to which such partnership adjustments relate.
- The partnership and its partners must file the Wisconsin amended returns within 180 days of making the administrative adjustment request under sec. 6227, IRC.
Note: The partnership and its partners are not required to report adjustments unless the changes or corrections, if made in the reviewed year as defined under sec. 6225, IRC, affect the amount, under ch. 71, Wis. Stats., of net tax payable, of a credit calculated, of a Wisconsin net operating loss carried forward, of a Wisconsin net business loss carried forward, or of a capital loss carried forward.
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Where do partnerships file Wisconsin returns?
Partnerships are required to file Form 3 returns electronically and may file electronically through the
Federal/State E-Filing Program. If the requirement to file electronically causes an undue hardship, a taxpayer may request an electronic filing waiver by filing
Form EFT-102,
Electronic Filing or Electronic Payment Waiver Request.
Note: If the partnership has 10 or fewer partners and the partnership's income on Form 3, Part II, Schedule 3K, Line 23, column (d) is $20,000 or less, the partnership does not need to file Form EFT-102 to request an electronic filing waiver and may file a paper return using the instructions below
If the waiver is approved, file your return on paper using these mailing instructions:
- Do not fasten, staple or bind the pages of your return. Use paper clips instead.
- Mail return to: Wisconsin Department of Revenue, PO Box 8965, Madison WI 53708-8965.
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What is the deadline for filing a Wisconsin partnership return?
A partnership must file its partnership return, Form 3, by the 15th day of the 3rd month following the close of its taxable year.
For returns with a short taxable year (period of less than 12 months), be sure to use the correct year's tax return when filing. If the tax returns are not yet available, wait until the returns become available and file under extension. For example, if a taxpayer has a short period from January 1, 2023 through March 31, 2023, the 2023 Form 3 will not be ready by June 17, 2023 (unextended due date for a March 31 year-end). Wisconsin law provides for the same extension period as the Internal Revenue Service (IRS) to file the partnership return (see question 8 below). So, filing under extension will allow the correct years return to be filed when the 2023 Form 3 is available (typically November 1). Note that an extension does not extend the time to pay a balance due. In order to avoid interest charges, pay the amount due by the 15th day of the 3rd month following the close of the taxable year.
If Form 3 is filed late, without an extension, the partnership may be subject to penalties and interest. See question 8 for further explanation on extensions.
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Are extensions available if a partnership can't file a Wisconsin return by the due date?
Any extension allowed by the Internal Revenue Service for filing the federal return automatically extends the Wisconsin due date, provided the partnership includes a copy of the federal extension with its Wisconsin return. In general, the IRS allows an extension period of six months for partnerships.
If a partnership is not requesting a federal extension, but needs additional time to file a Wisconsin return, the partnership may obtain an extension available to partnerships under federal law. To receive a Wisconsin extension, the partnership must include a completed copy of the appropriate federal extension application form or a statement explaining which federal extension provision is being used.
CAUTION: An extension for filing the return doesn’t extend the time to pay the franchise or income tax. Interest will be charged on the tax not paid by the 15th day of the 3rd month following the close of the taxable year. A partnership can avoid interest charges during the extension period by paying the tax due by that date.
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How do I submit an estimated tax or tax return payment for a partnership?
For information on submitting a payment, visit the department's
Make a Payment web page under "Make a Payment - Corporations, Partnerships, & Pass-Through Withholding."
Note: If making a return payment at the time of filing, submit your payment using one of the online options provided on our
Make a Payment web page or submit your payment with your mailed return.
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Who is subject to the economic development surcharge?
For taxable years beginning on or after January 1, 2013, the economic development surcharge no longer applies to partnerships or limited liability companies treated as partnerships.
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How does a partnership amend a Wisconsin partnership return?
To file an amended Wisconsin return, use Form 3 and check the "Amended return" option in box C on the front of the return. Include Schedule AR,
Explanation of Amended Return, to explain any changes made.
If the income, deductions, credits, or other information provided to any partner on Wisconsin
Schedule 3K-1,
Partner's Share of Income, Deductions, Credits, etc., is incorrect, file an amended Schedule 3K-1 for that partner with the amended Form 3. Also give a copy of the amended Schedule 3K-1 to that partner. Check the "Amended 3K-1" option in box C2 to indicate that it is an amended Schedule 3K-1.
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What types of permits does a partnership need if starting a new business in Wisconsin, and should the partnership be aware of any special taxes?
Certain partnerships doing business in Wisconsin are required to be registered with the Department of Financial Institutions (DFI). For more information, visit the
DFI website or call (608) 261-7577.
Sales, use, and withholding taxes are common taxes for businesses which require a permit from the department. To obtain more information about these business taxes, contact any
Department of Revenue office, call (608) 266-2776, or email us at
DORSalesandUse@wisconsin.gov.
If a partnership has a nonresident partner, the partnership must pay a withholding tax on the income allocable to the nonresident partner. The withholding is paid on an annual basis, and is reported on
Form PW-1, Wisconsin Nonresident Income or Franchise Tax Withholding on Pass-Through Entity Income. For more information, see the
Pass-Through Entity Withholding common questions.
For questions about what other permits may be required, or for assistance in obtaining a permit, call the Wisconsin Economic Development Corporation's and University of Wisconsin System's Wisconsin Business AnswerLine at (800) 940-7232.
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If a partnership closes its business, should the partnership notify the Wisconsin Department of Revenue?
If a partnership terminated during the taxable year, check box G on the front of Form 3. Generally, the final return is due on or before the federal due date. If a partnership holds sales, use, or withholding tax permits, contact the department at (608) 266-2776 or email us at
DORSalesandUse@wisconsin.gov.
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What records should a partnership keep for Wisconsin tax purposes, and how long should the records be kept?
A partnership must keep accurate records to verify items of income, deductions, and credits claimed on the partnership return. Following is a listing of some of the tax records that should be maintained:
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Income: Keep sales journals, sales invoices, cash register tapes, financial statements, bank statements, contracts, and other documents to verify the income reported on the partnership's returns.
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Deductions: Keep purchase journals, purchase invoices, check registers, canceled checks, bank statements, and other documents to verify expenses claimed on the partnership's returns.
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Apportionment Percentages and Credits: Keep all supporting work papers and other documents used in computing the apportionment percentages and credits claimed on the partnership's returns.
Generally, a partnership must keep tax records at least until the statute of limitations expires for the tax return, or each partner's tax return, on which any of those items of income, deductions, apportionment percentages, or credits appear. Usually this is four years from the due date of the return or the date filed, whichever is later.
Keep records relating to property owned by the partnership as long as they are needed to figure the basis of the original or replacement property and for four years after a partnership return, or each partner's tax return, is filed on which any sales or other dispositions of the property are reported.
Keep copies of tax returns indefinitely.