S Corp Return: Everything You Need to Know
An S Corp return is a tax return that is filed for those profits and losses sustained by an S Corporation.3 min read
2. What’s Included on Form 1120s
3. Quarterly Income Tax Deadlines
4. Unemployment Taxes
5. Penalties for Filing Late
An S Corp return is a tax return that is filed for those profits and losses sustained by an S Corporation. An S Corp is referred to as a pass-through tax entity, which means that the profits/losses are passed through to the owners of the corporation who will report it on their personal tax returns.
With that said, S Corps still must file an informational income tax return every year, along with other tax-related documents for the purpose of identifying tax withholdings for employees.
Since the S Corp operates as a pass-through entity, it isn’t subject to double taxation as is the case with a C Corporation, where taxes must be paid at the corporate level and then again at the personal level for any distributions made to the shareholders.
Tax Return Deadline
As previously noted, the S Corp must file an informational tax return every year; it is filed by the 15th day within three months after the taxable year has ended, which is usually March 15.
The S Corp must file Form 1120s and include all of the company’s financial activities, i.e., profits, losses, loans, etc., along with attaching Schedule K-1 for all shareholders. The Schedule K-1 identifies all shareholder shares of taxable income from the business, which they will then report on the personal income tax return.
If the business cannot file the applicable documents by the due date, then the company can obtain a six-month extension by filing Form 7004 (Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns) with the IRS. The shareholders are still subject to the same general tax deadline for most people, which is April 15.
For a recently dissolved S Corp, the business must file by the 15th of the 3rd month after the date the business dissolved. If, however, the S Corp was terminated and reverted to a C Corp, then the S Corp will need to file Form 1120S by the due date of the C Corp’s short year-end.
What’s Included on Form 1120s
The following information is included in Form 1120s:
- Selection effective date, which is the date when your business chose to be taxed as an S Corp
- Business activity code, which is the industry in which your business operates
- Product/service, which identifies the type of products or services that your business offers
- Number of shareholders
- Employer Identification Number (EIN)
- Date of incorporation
- Identify if it is the first year filing as an S Corp
- Profit and loss statement, i.e., financial statement
- Balance sheet
- Accounting method
- Other general business information
Quarterly Income Tax Deadlines
Is the S Corp has employees, then it will need to withhold federal income tax from employees paychecks, along with Social Security and Medicare taxes.
All S Corps with employees will need to file Form 941 quarterly with the IRS to report the cumulative amount that it has withheld for that quarter. The due dates are January 31, April 30, July 31, and October 31.
If you have employees, you might also need to file a Federal Unemployment Tax Return (Form 940) every year. If your S Corp pays wages of at least $1,500 in a quarter or has one or more employees working partial days throughout 20 or more weeks, then it usually has to file Form 940.
This form will report the amount of wages that an S Corp owes in unemployment taxes. It is due on January 31 of each year. If you choose to pay such quarterly taxes up front for the entire year, then the due date is February 10.
Penalties for Filing Late
If you miss the deadline for filing Form 1120s, then you will be penalized in the amount of $195 per month and per shareholder. Therefore, if you have 100 shareholders (the maximum amount an S Corp can have) and you are one month late in filing Form 1120S, then you will owe $195 X 100 = $1,950.
Furthermore, if you file Form 941 after the due date and there is a tax balance due, then you will be imposed a 5 percent penalty each month, up to a ceiling of 25 percent. Penalties will also apply for late filing of Form 940.
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