Neb. Admin. Code § 316-24-004 — S Corporations

004.01 Filing requirements; Form 1120-SN. A small business corporation that has elected to file under Subchapter S of the Internal Revenue Code shall file Form 1120-SN for purposes of reporting net income of the S corporation and income subject to Nebraska income tax by the respective shareholders. 004.02 Character of income and deductions to shareholders. Each shareholder's proportionate part of the corporation's income and deductions will retain the same character and classification as allowed for federal income tax purposes. 004.03 Nonresident shareholder income tax returns and withholding. Nonresident shareholders shall file a Nebraska income tax return and include in Nebraska adjusted gross income that portion of the corporation's Nebraska income tax allocable to their interest in the corporation, together with any other Nebraska source income. 004.03A Each nonresident shareholder shall execute Form 12N which shall be attached to the corporation tax return, Form 1120-SN. Form 12N is an agreement which provides that the shareholder will file a Nebraska income tax return and pay income tax on all income received from Nebraska sources. 004.03B If a nonresident shareholder's executed Form 12N is not attached to the corporation tax return, the corporation shall complete Form 14N and withhold and remit an amount equal to the highest individual income tax rate on the nonresident shareholder's share of the corporation's taxable income which was derived from or attributable to sources within this state. 004.03C Nonresident shareholders do not have to file a return if their only connection with the state is the conduct of the business activities of the S corporation, and the corporation has withheld tax from all the Nebraska income attributable to the nonresident's share of the organization's income. The full amount of the withholding is, at the taxpayer's option, retained in lieu of the filing of an individual income tax return. Any nonresident who so desires can still file a return and claim a refund if there is one due. Any nonresident who files Form 12N to avoid withholding must still continue to file Form 1040N. (Section 77-2734.01, R.R.S. 1996. November 11, 1998.)