18066: AR - Pass-Through Entity-Level Tax (PTET)

Arkansas law allows for eligible entities to elect to pay tax at the entity level instead of passing through the income to shareholders. To make the election, the pass-through entity must file Form AR1100PET (e-file) or AR 362PT (by mail). The election must be made by the due date or extended due date of the return. Once made, the election is in effect for the entity for each year until revoked. 

Note that per Arkansas, "If the business elects to file a PET tax return, it should not file an Arkansas Sub-S return or Arkansas partnership return."

For more information, see the AR DFA. 

1065

To generate Form AR1100PET, in Drake Tax, go to AR > Pass Through Entity tab and complete all necessary entries on the relevant screens. In View/Print mode, the AR1100PET pages 1-4 are produced. Payments are available and the return can be e-filed through Drake Tax. 

To generate Form AR362, complete the AR > 362 screen. This form is for making or revoking the election by mail. Form 1100PET must still be filed each year and relevant information provided to partners. 

1120-S

To generate Form AR1100PET, in Drake Tax, go to AR > Pass Through Entity tab and complete all necessary entries on the relevant screens. In View/Print mode, the AR1100PET pages 1-4 are produced. Payments are available and the return can be e-filed through Drake Tax.

To generate Form AR362, complete the AR > 362 screen. This form is for making or revoking the election by mail. Form 1100PET must still be filed each year and relevant information provided to shareholders. 

1040

The shareholder/partners should receive a copy of Form AR1100PET where their share of the income and tax is reported on page 2. They should also receive an AR K1 from the entity. 

In Drake Tax, on the 1040 return, enter the K1 as it was received on the federal K1P and/or K1S screen.

• Enter the tax paid on the K1P screen > 1065 K1 12-20 tab > State Tax Withheld.
• Enter the tax paid on the K1S screen > 1120S K1 11-17 tab > State Tax Withheld.

Then go to AR > PADD  and AR > PSUB screens and enter the relevant amounts for the income/losses. Per the instructions, "If you are a member of an entity that participate in Pass-Through Entity Tax include all income from the PET return on the Individual return. Use the AR-OI form to backout the income or losses that were reported on the Pass-Through level."

This shows on on Form AR-OI on lines 7 & 14 in View/Print mode.