business is then transferred to the proprietor’s individual Form 1040. The sole proprietor uses Schedule SE (Form 1040), Self-Employment Tax, to report net self-employment income for purposes of computing Social Security, Medicare and self-employment tax. Minnesota: There is no separate form for reporting sole proprietorship income. To compute Minnesota income tax, the proprietor uses form M1, Individual Income Tax Form. A copy of the federal Form 1040, including a copy of Schedule C (Form 1040), plus Schedule SE, if appropriate, must be attached to Minnesota Form M1. Minnesota does not impose a self-employment tax. Partnership. Federal: The partnership files Form 1065, U.S. Return of Partnership Income, which is an information return. No tax is paid by the partnership with this return. Other forms and schedules may be required, including Schedules and Schedule K-1 (Form 1065). Individual partners use Schedule E (Form 1040), Supplemental Income and Loss, which is prepared with information from their Schedule K-1 of Form 1065, to report their distributive share of partnership income, deductions, credits and losses on their individual Form 1040. Schedule SE (Form 1040) is used to compute Social Security and Medicare self-employment tax. Minnesota: For Minnesota income tax purposes, the partnership files form M3, Partnership Return. Taxes paid by the partnership include: Minnesota Minimum Fee, Minnesota Composite Tax, and Withholding for Non-Resident Partners (described in the Tax Rates section of this Guide). Partnerships may also elect to pay Pass- Through Entity (PTE) Tax. Schedules KPI and KPC are supplemental K-1 schedules used for reporting modifications to federal income tax computations of partnership income and the other information partners need to complete their return . C Corporation. Federal: The C corporation reports its income, deductions and credits, and computes its tax, on Form 1120, U.S. Corporation Income Tax Return. Supporting forms and schedules may be required. If the corporation issues dividends, it must annually send its shareholders Form 1099-DIV, Dividends and Distributions, stating the amount of dividends paid. A copy also is filed with the Internal Revenue Service and the Minnesota Department of Revenue. The shareholder reports dividends received from the corporation on his or her individual Form 1040. Minnesota: The corporation files Minnesota Form M4, Corporation Franchise Tax Return. Dividends paid to shareholders are included in the shareholders federal taxable income reported to the Department of Revenue, Form M1. S Corporation. Federal: The S corporation files Form 1120-S , U.S. Income Tax Return for an S Corporation and supporting forms and schedules, including Schedule K-1 (Form 1120-S). The S corporation generally is not separately taxed. Individual shareholders report their share of the S corporation’s income, deductions and credits on their individual Form 1040, using information contained on the Schedule K-1. Minnesota: For Minnesota income tax purposes, the S corporation files orm M8, S Corporation Return. Taxes paid by the S corporation include: Minnesota S Corporation Taxes, (which apply only if the S corporation is paying federal income tax), Minnesota Minimum Fee; Minnesota Composite Income Tax; and Withholding for Nonresident Shareholders (see discussion in the Tax Rates section of this Guide). S corporations may also elect to pay Pass- Through Entity (PTE) Tax. Schedule KS is a supplemental K-1 type schedule used for reporting modifications to federal income tax computations of S corporation income and the other information a shareholder needs to complete the Minnesota individual income tax return, Form M1. Schedule KS is used for computing the Minnesota Composite Income Tax (when the S corporation pays the Minnesota tax on behalf of the nonresident shareholder). Schedule M8 is used to report the Withholding for Nonresident shareholders.
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