S-Corporation Frequently Asked Questions
Q: Am I required to file a North Dakota S corporation return?
A: A Form 60, S Corporation Income Tax Return, must be filed by a corporation that meets both of the following:
- It is required to file a Form 1120S; and
- It carries on business, or derives gross income from sources, in North Dakota during its tax year.
If an entity is a bank, trust company, bank holding company, or other financial institution defined under N.D.C.C. ß 57-35.3-01(2), it is subject to the North Dakota financial institution tax and must file Form 35, Financial Institution Tax Return. Do not complete nor file Form 60 if required to file Form 35.
Q: How does the corporation determine if its income is business income which must be apportioned?
A: Generally, all income derived from the S corporationís activity is business income and is subject to apportionment. For the definitions of business and nonbusiness income, see North Dakota Administrative Code ß 81-03-09.
Q: What is the passthrough withholding requirement?
A: An S corporation, or a limited liability company filing as an S corporation, is required to withhold North Dakota income tax for every nonresident individual shareholder whose distributive share of North Dakota income is $1,000.00 or greater. The S corporation must withhold at the highest individual income tax rate. The applicable rate for each year is set out in Form 60 and its instructions. The total withholding must be paid in full with the S corporation return when it is filed.
Q: Are there any exceptions to the withholding requirement?
A: An S corporation does not have to withhold North Dakota income tax from a nonresident individualís distributive share of North Dakota income if:
- The distributive share for the taxable year is less than $1,000; or
- In lieu of filing his or her own North Dakota individual income tax return, the nonresident individual shareholder agrees to be included in a composite individual income tax return filed by the S corporation.
Q: Who is an eligible shareholder that can be included in a composite return?
A: An eligible shareholder is an individual who is a nonresident of North Dakota and does not have any North Dakota income from other than the S corporation or any other S corporation, partnership, trust, or limited liability company (filing as a partnership or S corporation). The composite return and the S corporationís payment of the income tax calculated on it satisfies the North Dakota income tax filing and payment obligations of the eligible shareholders who elected to be included in the composite return.
Q: Is the S corporation required to make estimated income tax payments?
A: No. There is no requirement for the S corporation to make estimated income tax payments. However, if the S corporation expects a tax due on its return, an estimated payment can be made using Form 60-ES. Also, if an extension is granted and the S corporation expects a tax due, an extension payment may be made using Form 60-EXT.
Q: How does the S-corporation report income, gains, and losses to its shareholders?
A: An S corporation is not subject to North Dakota income tax. Instead, the shareholders are responsible for reporting and paying any applicable North Dakota income tax on their shares of the S corporationís income that is reportable to North Dakota. The amount of income or loss that a shareholder must report to North Dakota and the forms and procedures that apply depend on the type of shareholder.
The S corporation reports the income or loss to every nonresident individual, estate, or trust shareholder on a North Dakota Schedule K-1 (Form 60). The North Dakota Schedule K-1 (Form 60) is also used to report income or loss to every qualified subchapter S trust (QSST) and electing small business trust (ESBT) shareholder with a nonresident individual or estate beneficiary.
Unless there are any North Dakota statutory adjustments or credits to report to the shareholders, a North Dakota Schedule K-1(Form 60) is not required to be issued to any resident individual, estate, or trust shareholder. All income of the resident individual, estate, or trust shareholder is taxable to North Dakota, regardless of its source.
Q: How does the individual shareholder know how much withholding or composite tax has been paid on their behalf?
A: The amount of withholding or composite tax paid on behalf of each nonresident individual shareholder is reported to the shareholder on the North Dakota Schedule K-1 (Form 60).
Q: When and where do I file my North Dakota return?
A: The Form 60 must be filed on or before the 15th day of the fourth month following the close of the taxable year. For calendar year filers this date is April 15th. Mail the return to the Office of State Tax Commissioner, 600 E. Boulevard Ave., Dept. 127, Bismarck, ND 58505-0599.