-
What is a composite return?
In general, a nonresident partner or shareholder must file their own Wisconsin income tax return if they have Wisconsin
gross income of $2,000 or more. This filing requirement is satisfied when the nonresident partner or shareholder files a Wisconsin nonresident individual income tax return,
Form 1NPR,
Nonresident and Part-Year Resident Income Tax Return, or the pass-through entity (partnership or tax-option (S) corporation) includes the nonresident partner or shareholder on a composite return. Wisconsin does not require composite returns. The department has implemented these returns to simplify filing for taxpayers and the department. A composite return may be filed on behalf of
two or more qualifying and agreeing nonresident partners or shareholders.
Gross income means all income, before deducting expenses, reportable to Wisconsin which is received in the form of money, property, or services.
- For a partner, it includes the partner's share of partnership income, before deducting expenses, as reported on the partner's Wisconsin
Schedule 3K-1,
Partner's Share of Income, Deductions, Credits, etc., line 24, column e.
- For a shareholder, it includes the shareholder's share of tax-option (S) corporation income, before deducting expenses, on the shareholder's Wisconsin
Schedule 5K-1,
Tax Option (S) Corporation Shareholder's Share of Income, Deductions, Credits, etc., line 20, column e.
-
Which composite return do partnerships and tax-option (S) corporations use?
Form 1CNP,
Composite Wisconsin Individual Income Tax Return for Nonresident Partners, is used by partnerships, including limited liability companies treated as a partnership. See
Form 1CNP instructions for more information.
Form 1CNS,
Composite Wisconsin Individual Income Tax Return for Nonresident Tax-Option (S) Corporation Shareholders, is used by tax-option (S) corporations, including limited liability companies treated as a tax-option (S) corporation. See
Form 1CNS instructions for more information.
-
Who may not participate in a composite return?
A partnership or tax-option (S) corporation cannot file Form 1CNP or 1CNS on behalf of its nonresident partners or shareholders if it makes an election to pay tax at the entity level under sec.
71.21(6)(a), or
71.365(4m)(a), Wis. Stats.
Note: If an eligible partner or shareholder is a foreign individual who does not have a taxpayer identification number (TIN), they must apply for a TIN with the Internal Revenue Service (IRS). Form 1CNP/1CNS must not be filed until the IRS issues the partner or shareholder a TIN.
A partner or shareholder does not qualify and cannot participate in a composite return if any of the following are true:
- They file an individual income tax return on a fiscal year basis, rather than a calendar year basis.
- They are a Wisconsin resident during any part of the calendar year.
- They derive Wisconsin taxable income other than from the reporting pass-through entity.
- They wish to claim any tax credit or amounts deductible as itemized deductions.
- They are required to file Wisconsin
Schedule RT,
Wisconsin Related Entity Expenses Disclosure Statement, to report interest expenses, rental expenses, management fees and intangible expenses that result from related party transactions between the owner and the pass-through entity.
- They already filed or plan to file a
Form 1NPR for the taxable year.
- They filed
Form PW-2,
Wisconsin Nonresident Partner, Member, Shareholder, or Beneficiary Pass-Through Withholding Exemption Affidavit, and have been approved by the department to be exempt from pass-through withholding for the partnership's or tax-option (S) corporation's current taxable year.
- The partner or shareholder is an electing small business trust (ESBT).
- The partner or shareholder is an entity. However, see questions 4 and 5 for further explanation.
-
Can a non-individual be included on the composite return?
Generally, no. However, there are two exceptions:
- A partner or shareholder is a limited liability company (LLC) treated as a disregarded entity, the individual owner of the LLC may be included on Form 1CNP/1CNS.
- Certain grantor trusts may be included on Form1CNP/1CNS. See question 5 for further explanation.
Note: If a nonresident partner or shareholder is an LLC or grantor trust treated as a disregarded entity, the individual owner of the LLC or grantor of the grantor trust is deemed to be the partner or shareholder for purposes of filing Form 1CNP/1CNS and must be listed on the Form 1CNP in place of the entity. When reporting a nonresident partner's or shareholder's allocated portion of income or loss on Schedule 2 of Form 1CNP/1CNS, the same social security number (SSN) cannot be reported more than once in column (B). If an individual is an owner of an LLC or grantor of a grantor trust treated as a disregarded entity and both are nonresident partners or shareholders of the same partnership or tax-option (S) corporation, all income or loss allocated to the individual and the disregarded entity must be combined when reporting on Schedule 2 of Form 1CNP/1CNS. For more information, see the article titled
Reminders: Composite Returns, Form 1CNP or 1CNS, on page 3 of
Wisconsin Tax Bulletin 218 (July 2022).
-
What kind of trust can be included on the composite return?
If the partner or shareholder is a grantor trust that is not required to file federal Form 1041,
U.S. Income Tax Return for Estates and Trusts, the individual grantor of the grantor trust is deemed to be the partner or shareholder and may be included on Form 1CNP/1CNS. See the note in question 4 above for information on reporting income or loss of an individual grantor of a grantor trust on Form 1CNP/1CNS.
-
May an estate or trust file a composite return on behalf of its beneficiaries?
No. Composite returns are only available for qualifying nonresident partners of a partnership and nonresident shareholders of a tax-option (S) corporation. A beneficiary of an estate or trust must file their own Wisconsin income tax return.
-
How is income calculated on Form 1CNP?
- Compute the Wisconsin net income from amounts reported on each partner's Schedule 3K-1, column e, and enter on Form 1CNP, column C1.
- Enter each partner's share of Wisconsin gross income from Schedule 3K-1, line 24, on Form 1CNP, column C2.
- Enter each partner's guaranteed payments attributable to Wisconsin from Schedule 3K-1, line 4c, column e, on Form 1CNP, column D.
- If known, enter each partner's federal adjusted gross income, from their federal Form 1040, on Form 1CNP, column F. Entering this amount allows computing tax using the tax computation worksheet, instead of computing tax using the flat rate.
Note: Partners that are spouses and wish to compute their tax jointly must use one entry line in Schedule 2. Enter both names on that line in column A, list both social security numbers in column B, and combine their amounts in columns C1, C2, D, E, and F for purposes of determining the tax to enter in column H.
Exception: If only two partners are included on the composite return and the partners are married filing a joint return, enter the name and social security number of each spouse on separate lines but combine their amounts for the remaining columns onto one line.
-
How is income calculated on Form 1CNS?
- Compute the Wisconsin net income from amounts reported on each shareholder's Schedule 5K-1, column e, and enter on Form 1CNS, column D1.
- Enter each shareholder's share of gross income from Schedule 5K-1, line 20, on Form 1CNS, column D2.
- If known, enter each shareholder's federal adjusted gross income, from their federal Form 1040, on Form 1CNS, column E. Entering this amount allows computing tax using the tax computation worksheet, instead of computing tax using the flat rate.
Note: Shareholders that are spouses and wish to compute their tax jointly must use one entry line in Schedule 2. Enter both names on that line in column A, list both social security numbers in column B, and combine their amounts in columns C, D1, D2, and E for purposes of determining the tax to enter in column G.
Exception: If only two shareholders are included on the composite return and the shareholders are married filing a joint return, enter the name and social security number of each spouse on separate lines but combine their amounts for the remaining columns onto one line.
-
The amounts reported on the composite return don't agree with amounts reported on Schedule 3K-1/5K-1. Why?
The difference may be due to the following reasons (the list is not all inclusive):
- Wisconsin does not allow a federal deduction.
Example: Wisconsin does not allow federal bonus depreciation. This amount is added back for Wisconsin purposes. Use the Wisconsin apportionment percentage to allocate allowable deductions to Wisconsin. - Passive activity losses are limited by the Internal Revenue Code.
- Wisconsin does not tax the full amount of long-term capital gains.
- For taxable years beginning before January 1, 2023, the net capital loss deduction is limited to $500.
- A net operating loss carryforward is claimed.
- A lower-tier entity made an election to pay tax at the entity level under sec.
71.21(6)(a), Wis. Stats. A lower-tier entity is a pass-through entity (i.e. partnership) that is directly or indirectly owned by another partnership or tax-option (S) corporation.
If any of these differences apply, include a schedule showing the computation of net income.
-
Can Wisconsin itemized deductions be claimed on the composite return?
No. A partner or shareholder must file a Wisconsin nonresident return, Form 1NPR, in order to claim a Wisconsin itemized deduction for purposes of computing the Wisconsin itemized deduction credit.
-
Can a credit, such as the angel investment tax credit, be claimed on the composite return?
No. A partner or shareholder must file a Wisconsin nonresident return, Form 1NPR, in order to claim a tax credit.
-
Can a prior year net operating loss be claimed on a composite return?
Yes. To claim a net operating loss carryforward, prepare and include a schedule showing the computation of the carryforward.
Note: An individual generally must have a federal net operating loss in order to have a Wisconsin net operating loss. For exceptions, see
Wisconsin Tax Bulletin 70 (January 1991), page 19.
-
Do I make quarterly 1CNP/1CNS payments?
No. The partnership or tax-option (S) corporation will make quarterly estimated
pass-through withholding payments if required. The entity reconciles these payments and informs the department of the amount allocable to each partner or shareholder by filing
Form PW-1,
Wisconsin Nonresident Income or Franchise Tax Withholding on Pass-Through Entity Income. Those amounts are then claimed on the Form 1CNP/1CNS or on the partner's or shareholder's individual income tax return if they are not participating on the composite return.
-
How do I file?
Partnerships and tax-option (S) corporations are required to file Form 1CNP/1CNS returns electronically and may file electronically through the
Federal/State E-Filing Program or
My Tax Account, the department's free electronic filing application.
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. If the waiver is approved, mail your return to: Wisconsin Department of Revenue, PO Box 8965, Madison WI 53078-8965.
-
Which attachments do I include with the composite return?
Include any schedule supporting the differences noted in question 9.
Example: Include a schedule showing computations when a net operating loss carryforward is claimed.
Do not include the following with Form 1CNS/1CNP: Federal Forms 1120S, 1065; Federal Schedules K-1; Wisconsin Forms 5S, 3, PW-1; or Wisconsin Schedules 5K-1 or 3K-1.
-
The pass-through entity has a fiscal year end. Which year should be used on the composite return?
The end of the entity's reporting period determines the year of the composite return. The beginning of the entity's reporting period determines the year of the pass-through withholding return and corporation return.
Example: A tax-option (S) corporation's fiscal year ends July 31, 2024. The reporting period begins August 1, 2023. The tax-option (S) corporation will file a 2024 composite return, a 2023 pass-through withholding return and a 2023 corporation return.
-
Who files an amended return?
Depending on what changed, either the pass-through entity or the partner or shareholder is required to file an amended return.
PASS-THROUGH ENTITY: The pass-through entity must file an amended return to report changes that affect the partner's or shareholder's portion of income or loss.
PARTNER OR SHAREHOLDER: The partner or shareholder must file an amended return to report changes other than those that affect the partner's or shareholder's portion of income or loss.
Example: A partner or shareholder participates on the composite return, but wants to claim a tax credit. The partner or shareholder 1) files a Wisconsin Form 1NPR to claim the tax credit and claims the amount of net tax that was previously assessed for the partner or shareholder on the composite return, 2) checks the amended return box on Form 1NPR, and 3) includes a Schedule AR,
Explanation of Amended Return, indicating which composite return originally included the partner or shareholder. The receive date of the Form 1NPR will then be changed to the receive date of the composite return.
-
What are the due dates for filings related to composite returns?
If the regular due date falls on a weekend or legal holiday, the return and/or payment are due on the business day immediately following the weekend or holiday.
| Tax-Option (S) Corporation calendar year filers: |
|---|
| Corporation Estimated Tax Payments | April 15, June 15, September 15 and December 15 (A) |
| Corporation Return, Form 5S | March 15 (B) |
| Pass-through Withholding Estimated Tax Payments | March 15, June 15, September 15 and December 15 (C) |
| Pass-through Withholding Return, Form PW-1 | March 15 (B) |
| Composite Return, Form 1CNS | April 15 |
Due dates for fiscal filers:
(A) 15th day of the 4th, 6th, 9th, and 12th month of the taxable year (exception: tax years beginning in April are due June 15th)
(B) 15th day of the 3rd month following the end of the taxable year
(C) 15th day of the 3rd, 6th, 9th, and 12th month of the taxable year
| Partnership calendar year filers: |
|---|
| Partnership Estimated Tax Payments | April 15, June 15, September 15 and January 16 (D) |
| Partnership Return, Form 3 | March 15 (E) |
| Pass-through Withholding Estimated Tax Payments | March 15, June 15, September 15 and December 15 (F) |
| Pass-through Withholding Return, Form PW-1 | March 15 (E) |
| Composite Return, Form 1CNP | April 15 |
Due date for fiscal filers:
(D) 15th day of the 4th, 6th, and 9th month of the taxable year, and the 15th day of the 1st month following
the taxable year.
(E) 15th day of the 3rd month following the end of the taxable year.
(F) 15th day of the 3rd, 6th, 9th, and 12th month of the taxable year.
Extended due dates may be available. Check the form instructions.
-
Why did I receive a bill after completing my composite return when I made estimated withholding tax payments?
Wisconsin uses Form PW-1 to reconcile withholding tax payments claimed on Form 1CNS/1CNP. Form PW-1 must be filed before the Form 1CNS/1CNP to prevent potential return processing issues.