1065 Partnership for Multimember LLC Question

[RN_Dena]

My husband has a new (2022) Michigan multimember  LLC that does work in both MI and OH. They provide a service (no goods sold and no employees) all members are equal owners so also no w-2’s and we had no 1099 payments to others. We filed the 1065 and also got the schedule k-1’s from that to the owners. 

One member lives in MI and two in OH. What/if any filing requirements are there for the states for the business—-or is that only done when the members do their personal 1040’s. Do they need to specify amount/payments made in each state anywhere or not because they are reciprocal states.  

Their gross receipts were less than 250,000. 

[AliciaP1]

Since the income from the partnership LLC is derived from MI and OH and less than $250,000 in gross receipts, there are no state returns to be filed for either state.  The partners will report their K-1 on their respective individual returns including their state of residence.

[RN_Dena]

If next year the gross receipts are more than $250k, what will be required.  Also are both the OH IT 1140 and MI FTE Tax Optional---if you made a lot of money and wanted to use as a deduction to reduce your federal income taxes.  Do both both these need to be elected? I feel I understand the MI FTE Tax, but the OH IT form 1140 is confusing to me.

[PatriciaV]

Yes, the election to pay tax on behalf of the partners is optional in both Michigan (Michigan Flow-Through Entity Tax) and Ohio (Ohio Pass-Through Entity Tax).

Also, neither state has a true partnership tax return. Instead, partners report the partnership activity from the federal K-1 on a personal tax return. This activity flows through to the individual state income tax return.

You may need to file Ohio Form IT-1140, which reports and pays Ohio withholding on nonresident partners. You can file this return through TurboTax or online on the Ohio Tax Department website (read the FAQs here).