Notice CP282 "foreign partner" on Form 1065

[ISWF]

Situation: I e-filed my partnership's Form 1065 with TurboTax Business, which has been accepted by the IRS. I subsequently received a Notice CP282. That notice says that I may have additional filling requirements for having a foreign partner. On the K-1 I indicated she was a foreign partner as TurboTax indicated that for non-citizens.

My wife is my sole partner in the business but she is considered a Non-Resident Spouse, has a Valid Social, and we've filed jointly for our Individual Tax Forms since we got married back in 2017. For our individual returns, she is considered US Resident as I am a US Citizen. Does the same methodology apply to our partnership? She has no ties to her origin country.

[JotikaT2]

Since you marked her as being a foreign partner, the IRS has a requirement that any income earned by the foreign partner should have a withholding tax.  

Based upon what you have described above, your wife is not a foreign person as she resides within the United States and has a Social Security number.  You can reply to this notice by writing "not liable" on the notice and sending the notice back to the address at the top of the notice.  

Please see this link from the IRS for additional information.

[pk]

@ISWF ,  I don't  know what prompted you to call your partner as foreign person.  AS I see from your  port:

(a) your spouse is your partner.  You are a citizen and she is not .  So what is her immigration status ?  Work visa or Green Card ?

(b) you file together MFJ -- implying she chooses to be treated as a US person (  Citizen /  GreenCard / Resident for Tax purposes ) .  Thus for tax purposes at least she is a US person.  I quote below  definition of foreign partner  from IRC section 1446. --->

foreign partner

For purposes of this section, the term “foreign partner” means any partner who is not a United States person.

26 U.S. Code § 1446 - Withholding of tax on foreign partners’ share of effectively connected income ...

Once you have the IRS started on your case -- i.e. note CP 282 -- you have to follow through. Explain to them that there is NO Foreign Partner -- it is your spouse ( including her  immigration status ) whom files with you as a  US Person.   Hopefully  they will allow you to correct the filing and go on from there .  You have to respond to their notice ASAP.

Is there more I can do for you ?   Which country is she from ? I am assuming that she lives with you in the USA --yes ?

pk