An S corporation that passes taxable income to its owners must report the New Mexico taxable net income or losses of all resident and nonresident owners on Form S-Corp, even if no tax is being withheld. An S corporation remits New Mexico withholding tax for each nonresident owner, unless the owner has an exception. Schedule S-Corp-D lists all the corporate owners and among other things shows the reason code for the owners for whom withholding isn't required.
When attempting to mark a New Mexico S-corporation tax return for electronic filing, e-file will be blocked and you will receive this message if any owner is indicated as withholding isn't required but no reason has been given:
SCORP-D - If box 5 Withholding Required is not checked, must use a reason code 1-12.
To remove this e-file block, from the NM 1120S Menu select:
- Tax Withheld & Paid on Owner's Income (S-Corp-D) - Select the first owner.
- Withholding Required - If the answer is already Yes, this owner is not causing the e-file block. If the answer is already No, select this menu line, and answer Yes or No. If the answer is No, you'll be prompted to enter the code corresponding to the reason why withholding isn't required. Click the link below for a list of reason codes in the Form S-Corp instructions.
Additional Information:
New Mexico S-Corp-D Reason Codes