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1. Can Tennessee income tax returns be filed electronically?
2. When and where do I send my tax payment?
If the taxpayer is on a calendar year basis, the return should be filed (postmarked) no later than April 15 (or the first workday thereafter if April 15 is a weekend or holiday). For a taxpayer on a fiscal year filing, the return is due by the fifteenth day of the fourth month following the end of the fiscal year.
Returns should be mailed to:
Tennessee Department of Revenue
Andrew Jackson Building
500 Deaderick St.
Nashville, TN 37242.
3. Does Tennessee impose an income tax?
The tax applies to individuals, partnerships, associations and trusts that are legally domiciled in Tennessee. A person who is legally domiciled in another state but maintains a place of residence in Tennessee for more than six months of the year is also subject to the tax; this does not apply to military personnel and full-time students who are legally domiciled in another state. The income a person receives while legally domiciled in Tennessee is subject to the tax.
4. If I request an extension of time to file and later discover I do not owe any tax, must I file a return?
No, a return is not required if no tax is due. However, if an estimated payment was submitted with the extension request, a return must be filed to request a refund.
5. If no tax is due, do I need to send in a zero return?
No. Only those persons whose legal domicile is in Tennessee and whose taxable interest and/or dividend income exceed $1,250 ($2,500 for joint filers) are required to file.
6. Why must I list my county and city on the return?
The income tax collected is shared with the cities and counties. If the taxpayer resides within the corporate limits of a municipality, three-eighths is distributed to the city. If the taxpayer does not reside within a municipality, the revenue is shared with the county.
Five-eighths of the revenue collected is deposited into the general fund. The remaining three-eighths is distributed to the cities and counties.
7. What are examples of taxable dividends and interest?
- From corporations
- From investment trusts or mutual funds, including capital gain distributions, whether taken in stock or cash
- From stock of banks or savings and loan associations situated outside Tennessee
- From distribution of profits among stockholders even though not formally declared a dividend
- From holding companies, including those holding banks or insurance companies situated inside or outside Tennessee
- From money market funds
- On all bonds issued by any person, firm, church, joint stock company, business trust or corporation
- On bonds issued by states, counties, municipalities or political subdivisions outside Tennessee
- On bonds issued by foreign governments
- On all mortgages or other commercial paper maturing in more than six months from date of issue
- On written obligations that state interest is to be paid and mature in more than six months from date of issue (See Nontaxable Interest for exceptions.)
8. What are examples of nontaxable dividends and interest?
- From stock in national banks (Not holding companies - See Taxable Dividends)
- From stock in state banks in Tennessee (Not holding companies - See Taxable Dividends)
- From federal and other building and/or savings and loan associations situated in Tennessee
- From stock in insurance companies licensed to do business in Tennessee (Not holding companies - See Taxable Dividends)
- From insurance policies
- From credit unions (No income from a credit union is taxable.)
- Percentage of income from mutual funds or investment trusts that was derived from obligations of the U.S. Government or the state of Tennessee and its political subdivision
- On bonds of state of Tennessee, its counties, municipalities or other political subdivisions
- On bonds of U.S. Government and its agencies (Interest on investments backed or guaranteed by the U.S. Government is taxable. For example, interest in connection with investments in the Federal National Mortgage Association, Government National Mortgage Association, or Federal Home Loan Mortgage Corporation is taxable.)
- On certificates of deposit held inside or outside Tennessee
- On commercial paper and other written obligations that mature in six months or less from date of issue
- On oral agreements
- On insurance policies if such interest is payable on demand
- On loans made to qualified businesses for improvements, expansions, or operations within an "Enterprise Zone" and mortgages on real property within an "Enterprise Zone" (See Title 13, Chapter 28, Tennessee Code Annotated.)
- On repurchase agreements or similar evidences of indebtedness
- On savings accounts, checking accounts, and money market accounts located inside or outside Tennessee. (Not money market funds - See Taxable Dividends)
- On credit union accounts or certificates of deposit (No income from a credit union is taxable.)
9. My 1099-DIV lists a part of the dividends paid under a box labeled "nontaxable." Does this mean the income is not taxable to Tennessee?
No. The 1099-DIV form is a federal tax form, and dividends paid are reported on the form based on federal tax law. Tennessee income tax differs from federal tax in many aspects. In most instances, the dividend still will be taxable to the Tennessee resident, unless a specific exemption exists in Tennessee law.
10. My partnership files a franchise and excise tax return. Must I also file an income tax return?
Yes, if the partnership has taxable interest and dividend income above the exemption, an income tax return must be filed. Credit for any income tax paid may be claimed against the excise tax on Schedule D of the franchise and excise tax return.
11. Are funds received from the lottery taxable under the Tennessee income tax?
No, lottery income is not taxable. This would include both lottery winnings and lottery scholarship awards.
12. What about pension income, Social Security, 401(k) and IRA distributions?
As the Tennessee income tax does not apply to salaries and wages, items of income such as Social Security and pension income are not subject to state tax. Tenn. Code Ann. Section 67-2-104(m) provides that income from stocks and bonds of pension trusts and profit-sharing trusts which are exempt from federal income taxation shall be exempt from the state income tax. This includes such accounts as IRA and 401(k) accounts. Distributions from IRAs and 401(k) plans are also exempt.
13. Are there any exemptions?
Yes. The first $1,250 of taxable income is exempt ($2,500 on a joint return).
Any person 65 years of age or older having a total annual income derived from any and all sources below specific limits is completely exempt from the tax. Total annual income from "any and all sources" means all income, including social security income, regardless of whether the income is taxable for federal purposes and without deduction for loss.
Total annual income limits:
2000 through 2011
2013 and after
Blind persons may be exempt upon filing a statement from their eye specialist. Please send letters certifying blindness to:
Tennessee Department of Revenue
Taxpayer Services Division
500 Deaderick St.
Nashville, TN 37242
14. Do I need to attach my federal return income return to my Hall income tax return?
No. If additional information is needed to complete an examination of your state income return, it will be requested by the department. However, copies of your federal income tax return are rarely needed.
15. Where can I find the income tax laws in the Tennessee Code?
The income tax law is in Tenn. Code Ann. Section 67-2-101 et seq.
16. Are distributions from general partnerships, limited partnerships, limited liability partnerships, limited liability companies, and professional or registered versions of like entities, subject to the Hall income tax?
- Distributions received by, or accrued or credited to, a partner by a general partnership are never taxable as dividends, because the general partnership interest is not transferable and thus can not be evidenced by a transferable certificate.
A distribution received by, or accrued or credited to, a partner is taxable as interest only if there is a written instrument requiring the general partnership to pay interest to the partner.
- Any amount paid to a limited partner by a limited partnership or limited liability partnership, or that is accrued or credited to a limited partner on the books of such an entity, is taxable as a dividend if the limited partner has a transferable certificate evidencing the limited partner's interest in the partnership. If the certificate is not transferable, or if the limited partner has no certificate, the payment, accrual or credit is not taxable as a dividend.
A distribution received by, or accrued or credited to, a limited partner is taxable as interest only if there is a written instrument requiring the limited partnership or limited liability partnership to pay interest to the limited partner.
- Distributions received by, or accrued or credited to, a general partner of a limited partnership or limited liability partnership are never taxable as dividends, because a general partnership interest is not transferable and thus can not be evidenced by a transferable certificate.
A distribution received by, or accrued or credited to, a general partner of a limited partnership or limited liability partnership is taxable as interest only if there is a written instrument requiring the entity to pay interest to the general partner.
- If a limited liability company is treated as a corporation for federal income tax purposes, any distribution received by, or accrued or credited to, an owner is taxable as a dividend.
- If a limited liability company is treated as a partnership for federal income tax purposes, any distribution paid to, or accrued or credited to, a member is taxable as a dividend if the member is equivalent to a limited partner and has a transferable certificate of ownership.
When the entity is treated as a partnership for federal purposes, any distribution paid to, or accrued or credited to, a member is taxable as interest only if there is a written instrument requiring the limited liability company to pay interest to the member.
Whether a member with a certificate of transferable ownership is equivalent to a limited partner depends on whether the member's rights in the limited liability company under Tennessee law are similar to those of a limited partner in a limited partnership.
If the limited liability company is member managed, then a member is equivalent to a general partner with rights to manage and control, and any distribution paid to, or accrued or credited to, the member is not a taxable dividend.
If the limited liability company is board managed and the member is not on the board and has no right to manage or control the entity, other than to vote for or against the board members who do manage and control the entity, the member is equivalent to a limited partner, and if the member has a transferable certificate of ownership, whatever is paid to the member, or accrued or credited to the member on the books of the limited liability company, is a taxable dividend.
If a member of a board managed limited liability company is on the board, the member is a general partner equivalent, and whatever is paid to the member, or accrued or credited to member on the books of the limited liability company, is not a taxable dividend.