S Corporation Tax FAQ

S-Corporation Questions

Q: I filed federal Form 2553 with the IRS to elect to become an S corporation. Do I also need to file a similar form with Minnesota?

A: No. Once you have filed Form 2553 with the IRS and it has been approved, Minnesota automatically accepts your S corporation status.

Q: Does Minnesota allow a parent S corporation to elect to treat its subsidiary as a QSSS (Qualified Subchapter S Subsidiary)?

A: Yes. Minnesota conforms to this federal treatment. The parent S corporation that owns a QSSS must file a single Form M8 reporting the income, deductions and credits for both the parent and the QSSS, as described in Revenue Notice 98-09.

Q: When I file a single QSSS return, how do I determine the minimum fee?

A: Complete a separate M8A and figure the minimum fee based on each company’s factors. Enter the sum of all minimum fees on the Form M8.

Q: When determining composite income tax, can I reduce the taxable income by a prior year’s net operating loss?

A: No. Only the current year’s income is included when determining composite income tax.

Q: If the S corporation does business in a reciprocity state (Michigan or North Dakota) and the sole shareholder is a Minnesota resident, does the shareholder have to file a return in the other state?

A: Yes. The shareholder would be required to file a return in the other state. The income earned by an S corporation does not qualify for exemption under the reciprocity agreements.

Q: What information will I need to pay taxes electronically?

A: to pay electronically online or by phone you will need your user name, password and your bank routing and account numbers. When paying electronically, you must use an account not associated with any foreign banks.

This is part of a series of posts on S corporation M8 Tax Form instructions.