Key Takeaways

  • Form 1120-S is used by S corporations to report income, losses, deductions, and credits to the IRS.
  • It’s a pass-through return, meaning profits and losses flow directly to shareholders’ personal tax returns.
  • Each shareholder must receive Schedule K-1 to report their share of income or loss.
  • Filing deadlines usually fall on March 15, or the 15th day of the third month after the fiscal year ends.
  • States may impose additional filing or franchise taxes even if the corporation is federally exempt.
  • Correct completion of Form 1120-S helps avoid IRS penalties and ensures proper shareholder reporting.

S Corp 1120S is the tax form that S corporations must use to report their net earnings to the Internal Revenue Service (IRS).

Introduction to IRS Form 1120S

S corporation must submit Form 1120S to the IRS in order to report their net earnings. Limited liability companies must also submit this form if they have elected S corporation status. Shareholders on S corporation must report their allocated net earnings on their personal tax returns.

On Form 1120S, you will report all:

  • Credits
  • Deductions
  • Income

The best way to complete Form 1120S is to download it from the IRS website and then fill it out manually. Essentially, Form 1120S is an S corporation's tax return and will be used to report dividends, losses, and income of the shareholders of the company.

Purpose and Structure of Form 1120-S

Form 1120-S serves as the U.S. Income Tax Return for an S Corporation. It reports the business’s financial activities—income, deductions, and credits—to the Internal Revenue Service. Unlike C corporations, which pay income tax directly, an S corporation’s profits and losses pass through to shareholders. Each shareholder then reports their share on their individual tax returns, using the Schedule K-1 issued by the corporation.

The form consists of several key sections:

  • Page 1 – Summarizes business income, deductions, and ordinary business profit.
  • Schedule B – Lists specific questions about accounting methods, stock ownership, and foreign activity.
  • Schedule K – Reports total corporate income, deductions, and credits for the year.
  • Schedule L – Includes the corporation’s balance sheet.
  • Schedules M-1 and M-2 – Reconcile differences between accounting and tax income, and track accumulated adjustments and other shareholder accounts.

Completing Form 1120-S accurately ensures that all shareholder information aligns with the corporation’s overall return.

S Corporation Tax Forms

C corporations and S corporations are the two basic types of corporations in the United States. The structure of each corporations is essentially the same, and both will need to incorporate using Articles of Organization. Each corporation is also required to have a board of directors and corporate by-laws. However, despite these similarities, S and C corporations are taxed very differently.

Regular corporations file Form 1120 and S corporations will use Form 1120S. The shareholders of S corporations must also file a Schedule K-1 form in order to report their portion of corporate losses and income. Effectively, the federal income tax rate for corporations is 35 percent. However, depending on how much income is taxed, this rate can range from 15 percent to 35 percent.

A variety of documents must be provided to the person preparing your corporation's taxes. In particular, a balance sheet for both the beginning and end of the fiscal year must be provided. Other documents and information to provide your tax preparer include data to help them calculate the cost of the goods your corporation has sold and an end of year loss statement.

Schedule K-1 and Shareholder Reporting

Every S corporation shareholder receives Schedule K-1 (Form 1120-S) to detail their portion of income, deductions, and credits. This document allows each shareholder to correctly report their share of the corporation’s results on their personal return.

Important details on the K-1 include:

  • Shareholder’s ownership percentage and changes during the tax year.
  • Allocated income, losses, and credits from the corporation.
  • Distributions or withdrawals to shareholders that may impact stock basis.

If distributions exceed a shareholder’s stock basis, the excess is taxed as a capital gain. The K-1 also tracks any separately stated items, such as charitable contributions or investment interest, which shareholders report individually.

Filing Dates

Since S corporations are taxed on the individual tax returns of company shareholders, your corporation will need to choose an end of year date that matches the end of the tax year. Generally, this date will be December 31. If you want to use a different date, you need to prove a reasonable business purpose for doing so.

The due date to file tax returns for most S corporations is March 15. If the end of year date of your corporation is December 31, your return date will be April 15. Corporations whose end of year date is something other than December 31 must. file their tax return on the fifteenth day of the fourth month after the end of the tax year.

Late Filing and Extension Options

Form 1120-S is typically due by March 15 for calendar-year S corporations. If additional time is needed, the corporation can file Form 7004, which grants a six-month extension to file the return. However, the extension applies only to filing—not to tax payments owed by shareholders.

Failure to file on time can result in significant penalties. The IRS imposes a fine of $220 per shareholder per month, up to 12 months, for late or incomplete filings. Timely filing ensures the shareholders’ returns also remain accurate and compliant.

S Corporation Background

S corporations are very similar to partnerships in terms of taxes, as both are considered pass-through entities. This means that the corporation does is not subject to federal income taxes. .

A big advantage of choosing to be taxed as an S corporation is that there is no self-employment tax on company profits for shareholders. The catch, however, is that an S corporation cannot have any profits unless company owners who are also employees are paid a reasonable salary that will be taxed for Medicare and Social Security.

In some circumstances, and S corporation will have no profits after paying their employee's salaries, which means they aren't actually benefiting from this tax status.

When a court is trying to decide if a salary is reasonable, they will generally consider six factors:

  1. What responsibilities and duties the employee/shareholder was expected to fulfill.
  2. How much experience the employee/shareholder possesses and what sort of training they have received.
  3. The amount of effort and time the employee/shareholder has put into the company.
  4. The dividends received by the employee/shareholder compared to their compensation.
  5. The wages of company employees who are not shareholders.
  6. The salary paid by similar businesses for the same services provided by the employee/shareholder.

Recordkeeping and Common Mistakes

Maintaining accurate records is essential for completing Form 1120-S. The IRS requires corporations to keep supporting documents for all reported figures, including:

  • Income statements and balance sheets
  • Payroll and dividend records
  • Shareholder stock basis and loan basis documentation

Common errors that trigger IRS notices include failing to report all income, omitting a Schedule K-1, or mismatching totals between Form 1120-S and shareholder returns. Another frequent mistake is misclassifying shareholder compensation—the IRS requires that owner-employees receive a reasonable salary before taking distributions.

S Corporation State Taxation

The tax status of your S corporation will largely depend on the state where your company is located. For instance, the taxes for S corporations in certain states will function the same as federal taxes, meaning the shareholders will be taxed on the amount of corporate income they have been allocated. However, some states will directly tax the S corporation. If your S corporation is located in Illinois, for example, you will be charged 1.5 percent tax for income earned by the corporation. This tax is in addition to the taxes paid by S S corporation shareholders.

State Filing Variations and Additional Forms

While the federal Form 1120-S governs national reporting, many states have their own S corporation requirements. Some states, like California and Illinois, charge a franchise or income tax directly on the corporation even if federal tax liability passes through.

Certain states require an additional state-specific return or election form to recognize S corporation status. Corporations operating in multiple states may need to file separate returns for each jurisdiction, reporting income earned within that state.

Always verify filing requirements with the state revenue department to avoid penalties or double taxation.

Frequently Asked Questions

1. What is IRS Form 1120-S used for?

Form 1120-S reports the income, deductions, and credits of an S corporation, serving as its federal income tax return.

2. Who must file Form 1120-S?

All S corporations, including LLCs that elect S corporation status, must file Form 1120-S annually.

3. What is the deadline to file Form 1120-S?

For most corporations, it’s due March 15, or the 15th day of the third month following the end of the tax year.

4. What is Schedule K-1 in relation to Form 1120-S?

Schedule K-1 details each shareholder’s share of the corporation’s income, deductions, and credits, which they report on their personal tax return.

5. Can an S corporation amend Form 1120-S after filing?

Yes. To correct mistakes, file an amended return using the same Form 1120-S and check the “Amended Return” box at the top of the form.

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