Partnerships, S corporations and limited liability companies are required to withhold Kansas income tax from a nonresident owners share (whether distributed or undistributed) of Kansas taxable income from the partnership, S corporation or limited liability company. This withholding requirement imposed by 2003 House Bill 2005 is effective July 1, 2003 for all taxable years beginning after 2002. The nonresident owner withholding rate is 6.45% of the Kansas taxable income.
Forms KW-7 and KW-7S are used to file and pay the Kansas withholding tax required on the Kansas taxable income of a nonresident owner of a pass-through entity. If you have nonresident owners receiving income from the pass-through entity, you must complete Form KW-7S. This return, and payment of the withholding tax using Form KW-7, is due on or before the due date of the Kansas income tax return of the pass-through entity, including extensions.
Partnerships, S corporations and limited liability companies must also complete and furnish each nonresident owner on whose behalf Kansas tax was withheld with Form K-19, Statement of Nonresident Owner Withholding. This form provides each nonresident owner with the information needed to claim the withholding paid on a Kansas income tax return
Nonresident Owner Options
- Form KW-7A - Opt-out Affidavit
If a nonresident shareholder, partner or member files an affidavit with the department by which such nonresident owner agrees to be subject to the personal jurisdiction of the department for the purpose of determining and collecting any Kansas taxes, including interest and penalties, the S corporation, partnership or limited liability company is not required to withhold with regard to that nonresident owner. In order to opt out of the withholding requirement, the nonresident owner must complete an affidavit, Form KW-7A, and provide it to the pass-through entity. A copy of the affidavit must be submitted with the KW-7S in lieu of payment of the withholding tax for that nonresident owner. Form KW-7A is available from our office or web site shown on the back.
- Withholding in lieu of Form K-40 or K-40C
If a nonresident owners only source of Kansas income is such owners share of the Kansas taxable income from an S corporation, partnership or limited liability company, the withholding paid on behalf of such nonresident owner may be retained in satisfaction of that nonresident owners Kansas income tax liability, and a K-40 or K-40C will not be required for that tax year. If the nonresident owner qualifies for this election, check the box on Form KW-7S; no additional documentation is required.
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