IRS Form 1120-S (U.S. Income Tax Return for an S Corporation) is used by S corporations to report their income, deductions, gains, losses, tax credits, distributions to shareholders, and other transactions.
S corporations are pass-through entities, meaning the income is passed through to shareholders and taxed at their individual income tax rates. In contrast, a C corporation is a taxable entity and pays corporate income taxes at the entity level.
Purpose of Form 1120-S
- Income Reporting. To report the gross income, deductions, gains, losses, and other transactions of an S corporation.
- Pass-Through Information. To provide each shareholder with a Schedule K-1, detailing their allocable share of the S corporation’s income, deductions, credits, and other items. Shareholders use the information on Schedule K-1 to complete their own tax returns.
Who Must File and What are the Deadlines
- Domestic Eligible Entities. An S corporation cannot be created under state law. The owners must first establish a domestic eligible entity under state law, and then the entity can file an S corporation election via Form 2553 (Election by Small Business Corporation). Once the corporation files the election, the corporation must wait for the IRS’s approval.
- Criteria for S Corporations: The domestic entity must meet specific criteria to qualify as an S corporation for federal tax purposes. In general, the entity cannot have more than 100 shareholders, only allowable shareholders (individuals, certain trusts, and estates but not partnerships, corporations, or non-resident alien shareholders), and only one class of stock.
- Due Date. The Form 1120-S is an annual tax filing due by the 15th day of the 3rd month after the close of the S corporation’s tax year. For calendar-year filers, this is March 15. Extensions can be requested using Form 7004 (Application for Extension of Time to File).
Key Information Required
- Basic Information. Name of entity, address, and Employer Identification Number (EIN), date of incorporation, S election effective date, and the NAISC business activity code.
- Income and Deductions. The S corporation must report its gross income, allowable deductions, tax credits, distributions to shareholders, and other financial information.
- Schedule K-1. Each shareholder of the S corporation receives their own Schedule K-1 (Form 1120S) which reports their allocable share of the S corporation items.
- Basic Schedules. The standard Form 1120-S filing consists of five pages which include Schedules B, K, L, M-1, and M-2.
- Additional Schedules. Depending upon the activities of the S corporation, additional forms, schedules, and attachments may be required. For example, if the S corporation has depreciable property used in its trade or business and claims depreciation expense, it should include Form 4562 (Depreciation and Amortization).
Video Tutorials on Form 1120-S
Please visit our channel for video tutorials on how to complete Form 1120-S:
- Playlist of Form 1120-S Tutorials
- How to File Form 1120-S for a Landscaping Company
- How to File Form 1120-S for a Restaurant Business
Additional Information
Taxpayers can find more information in the Form 1120-S Instructions and on the IRS website.