S Corp Filing Requirements: Everything You Need to Know
S corp filing requirements refer to the conditions an S corporation (S corp) must meet when filing tax returns. 3 min read
2. How Is an S Corporation Formed?
3. Information Needed for Filing Income Taxes for an S Corp
4. Filling Out Schedule B
5. Completing Schedule K
6. Employment Tax Forms
7. Deadline for Income Tax Return
S corp filing requirements refer to the conditions an S corporation (S corp) must meet when filing tax returns. An S corporation is a form of corporation that enables its income to pass through to its shareholders for tax purposes, allowing them to avoid double taxation. It is required to file IRS Form 1120S annually and provide a Schedule K-1 for each shareholder, who will, in turn, use the information provided to file Form 1040.
What Is an S Corporation?
An S corporation is a type of corporation that has one to 100 shareholders and allows its net income or loss to pass through to its shareholders in accordance with Subchapter S of the Internal Revenue Code. A company can elect S corp status by filing IRS Form 2553. It is required to meet certain eligibility criteria and let the IRS know that it wishes to pay taxes as an S corp within a certain time frame.
An S corporation is a hybrid business entity. Since it is a corporation, it is a separate entity from its owners and provides liability protection for them. However, it is similar to a partnership in that it passes its profits through to its owners' personal tax returns.
How Is an S Corporation Formed?
A company can become an S corporation by completing and submitting Articles of Incorporation to the state. After that, it has to elect S corp status with the IRS. The company has to make the election within a certain time frame after incorporation or the following year.
Information Needed for Filing Income Taxes for an S Corp
To file an income tax return for an S corporation, you need to have the current year's profit and loss statement and balance sheets for the start and the end of the year. Other details you need to provide include:
- Cost of goods sold
- Calculations of asset depreciation
- Corporate officer compensation.
Filling Out Schedule B
When filling out Schedule B in Form 1120S, you need to include the following:
- Information on the shares your company owns in other corporations.
- Ownership interest your company owns in any partnerships.
- Whether the total receipts of your company were lower than a certain amount for the year.
- Whether the total assets of your company were lower than a certain amount at the end of the year.
Completing Schedule K
An S corporation is also required to provide a summary of the income, deductions, tax credits, and other items that flow through to its shareholders. You must provide this summary through Schedule K when filing Form 1120S.
At the end of the tax year, you are required to issue a Schedule K-1 to each shareholder. The Schedule K-1 must be accompanied by a set of Shareholder's Instructions. Every Schedule K-1 form is specifically prepared for a certain shareholder. It includes information on the shareholder's share of the corporation's income for the past year, such as:
- Normal business income
- Income from real estate rental
Copies of Schedule K-1 forms issued to shareholders must be submitted along with your corporate tax return.
Employment Tax Forms
An S corporation with employees is required to withhold employment taxes on their salaries. In addition, salaries must be paid to shareholders and officers who perform work for the corporation. Similar to the salaries of ordinary employees, the salaries of shareholder-employees are subject to employment taxes. Taxes are paid to the federal government via electronic funds transfer.
In addition, your S corporation must file employer tax returns, or Form 941, on a quarterly basis. At the end of the year, you are required to issue a Wage and Tax Statement, or Form W-2, to each employee. Copies of W-2 forms and a Transmittal of Wage and Tax Statements form, or Form W-3, must be submitted to the federal government by the final day of February every year.
Deadline for Income Tax Return
The annual tax return of an S corporation must be filed by the 15th day of the third month after the end of the tax year, which is usually March 15. If you fail to file by the deadline, you can obtain a six-month extension by filing Form 7004.
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