December 19, 2008
Question of the Week: Do I Need to Withhold Tax on Distributions to Partners and S Corporation Shareholders?
Filed under: News
Vision Payroll

This week’s question comes from Nicole, an office manager. Our business is formed as two entities, an S corporation and a partnership. We’re located in Massachusetts. Do I now need to withhold income tax on distributions to partners and S corporation shareholders? Answer: All pass-through entities subject to pass-through withholding in Massachusetts must withhold unless the partner or shareholder to whom the distribution is paid has timely filed Form PTE-EX. The filing of Form PTE-EX with the entity certifies that the member is exempt from pass-through withholding. The deadline for filing Form PTE-EX the last day of the fourth month of the entity’s taxable year or within thirty days of the day that the member joins the entity, whichever is later. The form is now valid until changing circumstances invalidate the form, in which case the member must notify the entity within thirty days. Vision Payroll is ready to help its clients deal with the changes required by this new law. Please call us for our recommendations for a smooth transition to the new withholding requirements.


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