S Corp Tax Returns: Everything You Need to Know
S corp tax returns are different from the returns of other business entities in that an S corporation does not pay any tax to the IRS.3 min read updated on February 01, 2023
S corp tax returns are different from the returns of other business entities in that an S corporation does not pay any tax to the Internal Revenue Service (IRS). Instead of filing as a corporation, the income and deductions are "passed-through" to the corporation's shareholders to be reported on individual personal tax returns.
Information on S Corporation Taxation
While an S corporation does not file a tax return to pay income tax that may be due, it does file an annual tax return on Form 1120S. The form is for informational purposes only and is filed with the IRS to provide information on the earnings and expenses of the business.
An S corporation must prepare a separate K-1 for each of the corporation's shareholders. The form is to show their respective share of the earnings and deductions. For example, if an S corporation earns $1 million in revenue and lists $500,000 in deductible expenses and has 10 shareholders, there would be 10 forms with K-1 information filled out - one for each shareholder - listing $100,000 in revenue and $50,000 in expenses. The K-1s are then attached to Form 1020S and submitted to the IRS.
The date for filing corporations" rel="nofollow" target="_blank">Form 1120S and K-1s with the IRS is the 15th day of the third month following the close of the tax year. This makes the due date March 15.
Schedule B Filing Information
Schedule B is part of the 1120S filing process and includes:
- Whether the corporation owns stock in other corporations.
- Any ownership interest in any partnerships.
- The amount of the corporation's total receipts and if they were less than a specified amount.
- If the total assets of the corporation at year-end were less than a certain amount.
At the end of the year, if the total assets of the corporation are less than the amount designated, the following forms will not need to be filed:
- Reconciliation of Income (Loss) per Books with Income (Loss) per Return (M-1)
- Schedule L
- Balance Sheets per Books
An S corporation is also required to file a summary of information that includes income, credits, deductions, and other items that pass through to the shareholders. The summary information is listed in the Schedule K - Shareholders' Pro Rata Share Items sections.
Shareholders must include the amounts reported on the K-1 on their personal tax return.
For S corporations with employees, employment taxes must be withheld from their wages. As a rule, a shareholder providing services to the S corporation must be paid a salary. This rule also applies to officers whether they are or aren't shareholders.
S corporations are also responsible for filing quarterly employer tax returns using Form 941.
At the end of the year, each employee must be issued a Form W-2, Wage and Tax Statement. Copies of the W-2s and Transmittal of Wage and Tax Statements (Form W-3) must be filed annually by the last day of February.
Some states require the profits earned by an S corporation to be subject to federal tax. In other states, a flat fee is assessed on S corporations. In those states, an S corporation must file separate tax returns. States that don't assess taxes or fees on an S corporation are often required to file an informational return.
A state-withholding tax account will need to be set up to pay state and federal taxes for your corporation. Contact the Department of Revenue for your state for information about these taxes.
S Corporation Federal Tax Filing Dates
- S corporations generally must file an informational income tax return each year.
- Annual tax returns for an S corporation must be filed by March 15. This equates to the third month and the 15th day of that month at the end of the tax year.
- Form 1120S and Schedule K-1 must be filed together.
- If the March 15 filing day is not possible, an automatic extension can be obtained by filing Form 7004.
- Shareholders paying taxes on corporate income must follow the same filing guidelines set by the IRS for individuals, which means filing by April 15.
- For S corporations paying more than $1,500 in wages in a calendar year or having at least one employee working 20 or more separate weeks for at least a portion of the day, Form 940 must be filed.
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