Individual partners use Schedule E (Form 1040), which is prepared using information from their Schedule K-1 (Form 1065), to report their distributive share of partnership income, deductions, credits and losses on the individual Form 1040. Information from Schedule K-1 may be reported on other schedules in the 1040 series. Schedule SE (Form 1040) is used to compute Social Security and Medicare self-employment taxes. A married couple who jointly operate an unincorporated business and file a joint federal income tax return can elect not to be treated as a partnership for federal tax purposes provided that the married couple are the only members of the joint venture and materially participate in the running of the business. For more information, see Married Couples in Business and Election for Married Couples Unincorporated Businesses , from the IRS. This election carries over to the Minnesota tax return. Minnesota Income Tax Returns The partnership completes Form M3, Partnership Return, and files it with a copy of federal Form 1065 and Schedules K and K-1. The partnership may also have to pay a minimum fee based on property, payroll, and sales attributable to Minnesota. If the partnership has items of income, credits or modifications that are different from its federal return, the partnership must also issue Schedule KPI and/or Schedule KPC to its partners and include copies with Form M3. If the partnership has nonresident individual partners, it may pay composite income tax on their behalf using Schedule KPI. Individual partners who are not included on the composite income tax may be required to complete Form M1, Individual Income Tax. If it has nonresident individual partners who will not be included in the composite income tax, generally the partnership is required to withhold income tax (called nonresident withholding) on behalf of such partners and remit it with Form M3, by using Schedule KPI. If the partnership is making a pass-through entity tax election, it must file Schedule PTE with its Form M3 and file it on or before the extended due date for the return.
C CORPORATION
Federal Income Tax Returns The C corporation reports its income, deductions and credits, and computes its tax on Form 1120. Supporting forms and schedules may be required. If the corporation issues dividends, it must annually send Form 1099-DIV to its shareholders who receive more than $10 in dividends, stating the amount of ordinary income and qualified dividends paid. A copy of Form 1099-DIV is filed with the IRS. Shareholders report dividends received from the corporation on their individual Form 1040. Shareholders may be required to file Schedule B (1040) to report their dividend and interest income. Minnesota Income Tax Returns The C corporation reports state tax on Form M4, Corporation Franchise Tax Return. The corporation also may have to pay a minimum fee based on property, payroll, and sales attributable to Minnesota.
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