S corporations must withhold taxes on the portions of the entity's income allocated to its out-of-state shareholders.

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S corporations are required to withhold taxes on the portions of their income allocated to out-of-state shareholders, in accordance with state laws. This is known as nonresident withholding. The purpose of nonresident withholding is to ensure that nonresident shareholders fulfill their tax obligations in the state where the income is generated. The specific rules and rates for nonresident withholding vary from state to state.

S Corporations Must Withhold Taxes on the Portions of the Entity's