S Corporation Taxes | Form M8 Instructions

Corporate employeesBefore you complete Form M8, you must complete the following; you will need to reference them:

  • federal Form 1120 Sand supporting schedules, and
  • Schedule KS for each non resident shareholder and to any Minnesota shareholder who has adjustments to income (see page 10).

Check Boxes

Initial Return

If this is the S corporation’s first return filed in Minnesota, check the box on the front of the form.

Composite Income Tax

If you are paying composite income tax for your electing shareholders, check the box for composite income tax on the front of your return and see the instructions for line 3.

Financial Institutions

If you are a financial institution electing

to be taxed as an S corporation for federal purposes, check the box on the front of the form.

Qualified Subchapter S Subsidiary (QSSS)

If you are including a qualified subchapter S subsidiary (QSSS) on this return, check the box on the front of your Form M8.

If the parent S corporation has nexus with Minnesota, you must use the parent’s federal and state ID number. If the parent does not have nexus, file Form M8 under the federal and state ID numbers of a QSSS with nexus in Minnesota. In any event, a complete copy of the federal Form 1120S must be included with the Minnesota return.

See Three-Factor Formula for QSSS Filers on page 7 for more information.

Qualified Business Participating in a JOBZ Zone

If you are a qualified business participating in a JOBZ zone in Minnesota and all of your property and payroll are within the zone, you are not required to pay a minimum fee. Check the box on the front of Form M8.

Out of Business (final return)

If the S corporation is out of business and is not required to file Form M8 in future years, check the “Out of Business” box on the front of the form.

If you checked the “technical termination” box on your federal Form 1120S, you must attach a copy of your federal return to your Form M8.

Line Instructions

Round amounts to whole dollars. Decrease amounts less than 50 cents and increase amounts 50 cents or more to the next higher dollar.

Corporate Partners

When completing Form M8 and Schedules KS, be sure to include

any amounts reported on the Schedule KPC you received as a partner of a partnership (include Schedule KPC with your return).

Line 1—S Corporation Taxes

Enter the total of the following S corporation taxes on line 1, and check the applicable boxes to indicate the tax types included. Show the detail for each type of tax and the percentage apportioned to Minnesota. Multiply that amount by 9.8 percent (.098)—the corporate tax rate—to determine your Minnesota tax. For each tax, enclose a separate schedule showing your computation.

  • Determine the tax on the Minnesota portion of passive income subject to federal tax. Enclose a copy of the federal schedule used to figure your federal tax.
  • Determine the tax on the Minnesota portion of recognized built-in gain and net capital gain subject to federal tax.
  • If the S corporation is paying the LIFO recapture tax (figured for the last year the corporation was a C corporation) overa four-year period, include this year’s installment.

Line 2—Minimum Fee

Complete M8A of Form M8 to determine the minimum fee to enter on line 2. See the M8A instructions beginning on page 7.

You are exempt from the minimum fee if you are a qualified business participating in a JOBZ zone in Minnesota and all of your property and payroll are within the zone.

Line 3—Composite Income Tax

To determine line 3, you must first figure the amount of composite tax attributed to each electing shareholder. See the instructions for line 34 of Schedule KS on page 12.

Add the composite income tax attributed to all electing shareholders (the total of lines 34 from all KS schedules), and enter the result on line 3 of Form M8.

Line 4—Nonresident Withholding

To determine line 4, you must first figure the amount to withhold for each nonresident shareholder. See the instructions for line 35 of Schedule KS on page 12.

Add the withholding required for all nonresident shareholders (the total of lines 35 from all KS schedules), and enter the result on line 4 of Form M8.

If you received a signed and dated Form AWC, Alternative Withholding Certificate, from one or more shareholders, check the box provided on line 4 of Form M8. You must include the certificate(s) when you file your return.

Line 6—Employer Transit Pass Credit

If you provided transit passes at a reduced cost to your employees for use in Minnesota, complete and enclose Schedule EtP, Employer Transit Pass Credit.

Enter the amount of the credit that is being claimed directly by the S corporation and not passed through to the shareholders.

Line 6 cannot exceed the total of S corporation taxes and the minimum fee (sum of lines 1 and 2).

Line 8—Minnesota Nongame Wildlife Fund

You can help preserve Minnesota’s rare and endangered animals and plants by donating to this fund. Your donation will be added to your total tax and will decrease your refund or increase your balance due. Monies donated are deductible the following year.

For more information, go to the Minnesota Department of Natural Resources website at www.dnr.state.mn.us.

Line 10—Enterprise Zone Credit

If your business has been certified and approved by the Minnesota Department

of Employment and Economic Development (DEED) as employment property in an enterprise zone, enter the credit that is being claimed directly by the S corporation and not passed through to the shareholders. Enclose Schedule EPC.

For details about the zones, go to the DEED website at www.positivelyminnesota.com.

Line 11—JOBZ Jobs Credits

A refundable jobs credit, based on higher paying jobs, is available to qualified businesses operating in a JOBZ zone. A qualified business must have signed a Business Subsidy Agreement with the zone administrator. Complete and enclose Schedule JOBZ, JOBZ Tax Benefits.

Enter the total jobs credit that is being claimed directly by the S corporation and not passed through to the shareholders.

For details about the zones, go to the DEED website at www.positivelyminnesota.com.

Line 12—Cattle Tuberculosis Testing Credit

If you own cattle in Minnesota and you incurred expenses during the year to test your cattle for tuberculosis, you may qualify for a credit of 25 percent of your total expenses. to determine line 12, follow the steps below:

  • Expenses you incurred to conduct tuberculosis testing on your cattle in Minnesota
  • The credit is limited to 25% (.25) of your expenses . . . . . . .
  • Multiply step 1 by step 2 . . . . . . .

Enter the result from step 3 on line 12. You cannot pass this credit to your shareholders.

Expenses incurred in a calendar year in which tuberculosis testing of cattle in Minnesota is not federally required are not allowed in claiming the credit.

Line 13—Estimated Tax and Extension Payments

Enter your total prepayments, including:

  • your total 2011 estimated tax payments made in 2011 and 2012, paid either elec- tronically or with Form M72;
  • any 2011 extension payment, paid elec- tronically or with PV81, that was made by the regular due date when filing under an extension; or
  • the portion of your 2010 refund applied to your 2011 estimated tax.

Line 16—Penalty

Penalties are collected as part of the tax and are in addition to any additional charge for underpaying estimated tax. If you are paying your tax after the regular due date, include the appropriate penalties on line 16.

Late Payment

If the tax is not paid by the regular due date, a penalty is due of 6 percent of the unpaid tax on line 15.

Late Filing

If you file your return after the extended due date and owe tax, you must pay a late filing penalty. The late filing pen- alty is 5 percent of the unpaid tax on line 15.

Balance Not Paid

If you file your return after the regular due date and owe tax, an additional penalty is due. The additional penalty is 5 percent of the unpaid tax on line 15.

Payment Method

If you are required to pay electronically and do not, an additional 5 percent penalty applies to payments not made electronically, even if your paper check is sent on time.

Line 17—Interest

You must pay interest on the unpaid tax and penalty from the regular due date until the total is paid. The interest rate for calendar year 2012 is 3 percent.

To figure how much interest you owe, use the following formula with the appropriate interest rate:

Interest =
(tax + penalty) x # of days late x interest rate ÷ 365

Line 18—Additional Charge for Underpayment of Estimated Tax

If you did not pay the correct amount of es- timated tax by the due dates, you may have to pay an additional charge for underpaying or not paying estimated tax.

You may also owe an additional charge if the sum of lines 1 and 2 (less any credits on lines 10 through 13), composite income tax on line 2 or nonresident withholding on line 3, is more than $500.

Complete Schedule EST, Additional Charge for Underpayment of Estimated Tax, to de- termine the additional charge for underpay- ing estimated tax. Compute the underpay- ment charge separately for the S corporation taxes/minimum fee and for each nonresi- dent shareholder who has $500 or more of either composite income or nonresident withholding tax.

Enter the total charge, if any, on line 18. Enclose the schedule with your return.

Line 19—Amount Owed

Add lines 15 through 18. This is the amount of tax you owe. Be sure to check the ap- propriate box on line 19 to indicate your method of payment. See Payment Options on page 2.

Line 20—Overpayment

If line 14 is less than the sum of lines 9 and 18, subtract line 14 from the sum of lines 9 and 18. Enter the result on line 19 and enter zero on line 20.

If you have an overpayment, you may choose to have it direct deposited into your bank account. You may also choose to apply all or a portion of your overpayment toward your 2012 estimated tax account.

Line 21—2012 Estimated Tax

Skip this line if you owe additional tax.

If you are paying 2012 estimated tax, you may apply all or a portion of your refund to your 2012 estimated tax. Enter the portion of line 20 you want to apply toward your 2012 estimated tax.

Line 22—Refund

If you want to request your refund to be direct deposited into your bank account, complete line 23. Your bank statement will indicate when your refund was deposited to your account. Otherwise, skip line 23 and your refund will be sent to you in the mail.

Line 23—Direct Deposit of Refund

If you want your refund to be directly deposited into your checking or savings account, enter the routing and account numbers. You must use an account not as- sociated with any foreign banks.

The routing number must have nine digits. The account number may contain up to 17 digits (both numbers and letters). Enter the number and leave out any hyphens, spaces and symbols.

If the routing or account number is incor- rect or is not accepted by your financial institution, your refund will be sent to you in the form of a paper check.

By completing line 23, you are authorizing the department and your financial institu- tion to initiate electronic credit entries, and if necessary, debit entries and adjustments for any credits made in error.

Signature

The return must be signed by a principal officer of the corporation.

If you paid someone to prepare your return, the preparer must also sign. The preparer’s ID number and phone number should also be included.

You may check the box in the signature area to give us your permission to discuss your return with the paid preparer. This autho- rization remains in effect until you notify the department in writing (either by mail or fax) that the authorization is revoked.

Checking the box does not give your pre- parer the authority to sign any tax docu- ments on your behalf or to represent you at any audit or appeals conference. For these types of authorities, you must file a power of attorney or Form REV184 with the depart- ment.

Email address

If the department has questions regarding your return and you want to receive corre- spondence electronically, indicate the email address below your signature. Check a box to indicate if the email address belongs to an employee of the S corporation, the paid preparer or other contact person.

By providing an email address, you are authorizing the department to correspond with you or the designated person over the Internet and you understand that the en- tity’s nonpublic tax data may be transmitted over the Internet.

You also accept the risk that the data may be accessed by someone other than the intended recipient. The department is not liable for any damages that the entity may incur as a result of an interception.

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