How do partnerships file and pay quarterly estimated tax payments?

Partnerships generally do not pay estimated tax payments directly. Instead, the responsibility for paying estimated taxes falls on the individual partners. Here is a detailed explanation of how partnerships and their partners handle the filing and payment of quarterly estimated tax payments:

1. Partnership Filing Requirements:
   • Partnerships file Form 1065, U.S. Return of Partnership Income, to report income, deductions, gains, losses, etc. However, the partnership itself does not pay income tax. Instead, it passes through any profits or losses to its partners, who then report their share on their individual tax returns.
2. Partner's Responsibility:
   • Each partner receives a Schedule K-1 (Form 1065), which details their share of the partnership's income, deductions, credits, etc. The partners use this information to report on their individual tax returns (Form 1040 or Form 1040-SR).
   • Since partners are not employees of the partnership, the partnership does not withhold taxes on distributions. Therefore, partners may need to make estimated tax payments using Form 1040-ES, Estimated Tax for Individuals.
3. Estimated Tax Payments by Partners:
   • Partners must calculate their estimated tax payments based on their expected income, including their share of the partnership's income. They can pay these estimated taxes by:
     • Crediting an overpayment from the previous year's return to the current year's estimated tax.
     • Mailing a payment with a payment voucher from Form 1040-ES.
     • Using online payment options such as Direct Pay, EFTPS, or the IRS2GO application.
     • Using a credit card, debit card, or digital wallet.
     • Requesting an electronic funds withdrawal if filing Form 1040 or Form 1040-SR electronically.
     • Paying with cash.
4. Special Rules for Foreign Partners:
   • For foreign partners, the partnership may be required to withhold and pay tax on the foreign partner's share of effectively connected taxable income (ECTI). This is done using the principles of section 6655 to annualize the partnership's items of income, gain, loss, and deduction.
   • The partnership calculates and pays the 1446 tax on behalf of the foreign partners, and the foreign partners can claim this as a credit against their U.S. tax liability by attaching proof of payment (Form 8805 or Form 1042-S) to their U.S. income tax return.
5. Exceptions and Special Cases:
   • Partnerships generally do not have to pay estimated tax unless they expect their tax for the year (after subtracting any withholding and credits) to be $500 or more. In such cases, the partnership must make estimated tax payments.

In summary, while the partnership itself does not typically pay estimated taxes, the individual partners are responsible for making quarterly estimated tax payments based on their share of the partnership's income. They use Form 1040-ES and various payment methods to fulfill this obligation. For foreign partners, the partnership may need to withhold and pay tax on their behalf, which the foreign partners can then credit against their U.S. tax liability.

Sources:
Instructions for Form 1065 (2023)
Publication 583 (1/2021)
Publication 1518 (11/2012)
§ 1.6654-5. Payments of estimated tax.
§ 6654. Failure by individual to pay estimated income tax
§ 1.1446-3. Time and manner of calculating and paying over the 1446 tax.