A New Jersey partnership (LLC) has two partners. All work by the workers is performed in New Jersey, and the source of income is New Jersey. One partner is a New York resident, and one partner is an New Jersey resident. How should the tax be calculated for the nonresident partner? Also, I was under the impression that there is a $125 fee per resident partner.

ANSWER

The BIDaWIZ Team's Answer:

First, please note that the $125 fee is for more than 2 partners.

When you check the box composite on NJ-1065, you need to file an additional NJ-1080C, and pay the tax on a composite basis separately. Essentially, the partnership pays the tax on the distributive shares of the non-resident partner. The nonresident partner gets credit for the tax payment made by the partnership. New Jersey is one of those states where this can happen.

Please note that the non-resident partner cannot claim a credit for the taxes paid by the partnership on their NY state tax return.

References: Form NJ-1065 Instructions
State: New Jersey; New York