1. If the election is made, are Schedules 5K-1 required to be issued to the shareholders?


2. If the tax-option (S) corporation is a member of a multi-tier pass-through entity structure and any of the lower-tiered entities made an election to pay tax at the entity level, how does the tax-option (S) corporation complete Schedule 5K-1?

1. If the election is made, are Schedules 5K-1 required to be issued to the shareholders?

   Yes, an electing tax-option (S) corporation must provide each shareholder with a Schedule 5K-1. Amounts should be reported on Schedule 5K-1 in the same manner as if an election were not made.

   Exceptions:

   • An electing tax-option (S) corporation may not pass through a credit for taxes paid to other states and shareholders may not use taxes paid by the tax-option (S) corporation to compute a credit for taxes paid to other states.
   • An electing tax-option (S) corporation may not pass through Wisconsin withholding if the corporation claimed a refund of the pass-through withholding or submitted a written request to apply the pass-through withholding against the tax liability at the entity level.
   • An electing tax-option (S) corporation must provide a supplemental statement with each shareholder's Schedule 5K-1 detailing the items of income, gain, loss, deduction, and tax paid as a result of the election that are included on the electing tax-option (S) corporation's Schedule 5S-ET.
     
     

   If box #3 in Part B of Schedule 5K-1 is checked (i.e., the election is made), the shareholders should not report the income, gain, loss, and deductions on their Wisconsin individual tax returns.

   See the Schedule 5K-1 instructions for more information.

2. If the tax-option (S) corporation is a member of a multi-tier pass-through entity structure and any of the lower-tiered entities made an election to pay tax at the entity level, how does the tax-option (S) corporation complete Schedule 5K-1?
   
   
   • If the tax-option (S) corporation is also making the election to pay tax at the entity level, the tax-option (S) corporation must check boxes #3 and #4 in Part B of Schedule 5K-1 and provide each shareholder with a Schedule 5K-1 as explained in question 1 above.
   • If the tax-option (S) corporation is not making the election to pay tax at the entity level, the tax-option (S) corporation must check box #4 in Part B of Schedule 5K-1 and provide a supplemental statement with each shareholder's Schedule 5K-1 detailing the items of income, gain, loss, and deduction that have been taxed by a lower-tier entity.

Applicable Laws and Rules

This document provides statements or interpretations of the following laws and regulations enacted as of October 7, 2024: secs. 71.36, 71.365, and 71.775, Wis. Stats.

Laws enacted and in effect after this date, new administrative rules, and court decisions may change the interpretations in this document. Guidance issued prior to this date, that is contrary to the information in this document is superseded by this document, according to sec. 73.16(2)(a), Wis. Stats.

The department welcomes your input on our guidance. Submit comments on this guidance document.

Guidance Document Number: 100185

October 7​​, 2024