Form 1120-S, U.S. Income Tax Return for an S-Corporation

What is Form 1120-S?

Form 1120-S is an IRS tax form designed for S-Corporations (limited liability companies taxed
as S-corps) to gather information on the business’s income, losses, and deductions, credits of S-Corporation shareholders.

This article helps you to know more about S Corporation Tax Form 1120-S.

Who must file Form 1120-S?

A corporation must file Form 1120-S if the IRS elects it as S-Corporations by filing Form 2553
S-Corporations must attach Schedule K-1 with 1120-S which helps IRS to estimate the
ownership percentage and to allocate how much profit and loss should be assigned to an
individual shareholder.

If the shareholder does not see a difference in this percentage during the year, gains and losses are fairly simple to calculate. However, if the individual buys additional shares, or sells or transfers any holdings during the tax year, then gains and losses must be pro-rated on a per-share basis.

Why should S-Corporations file Form 1120-S?

S corporation status helps Shareholders to avoid double taxation. 

S Corporations are named as pass-through entities, so they are exempt from paying federal income taxes. Instead, shareholders report the corporation’s gains on their personal income tax return.

Form 1120-S is still required because it is filed with an attached Schedule K even though S-Corporation isn’t subjected to paying corporate taxes.

What is the difference between 1120 and 1120-S?

S-Corporations use Form 1120-S, while Form 1120 is used by C-Corporations to report their Corporation’s income & expenses.

Difference between S Corporation and C Corporation

Both types are classified as corporations and have several differences in taxation.

C Corporations are not pass-through entities like S Corps, and the Shareholders are required to pay corporate and personal income taxes. This is eventually named as Double-Taxation.

C Corps can have an unlimited amount of shareholders. However, S-Corps must have limited shareholders. Also, C-Corp Shareholders do not have to be US citizens or legal residents.

When is the deadline to file Form 1120-S?

S-Corporation Tax Form is due by the 15th day of the 3rd month following the end of the Corporation’s tax year. The deadline for the corporations following the Calendar accounting tax period is March 15.

The deadline will vary if your corporations follow the fiscal tax period.

What if you need more time to file Form 1120-S?

If you need additional time to file Form 1120-S, then you can request an additional 6 months of time by filing tax extension Form 7004.

How to fill out Form 1120-S?

To file Form 1120-S, you need to complete the following information:

1. Basic Information

  • Enter the tax year, Name, Address, EIN, incorporation date, S-Corp effective date, and business activity code (six-digit code representing your industry).
  • Enter the number of Share folders and total assets.
  • Businesses with total assets less than $50 million at the end of the tax year don’t need to file Schedule M-3 and thus don’t need to check the box on Item C.

2. Income & Deduction Reporting

Use Line 1a through 21 to report your corporation’s operating income and deductions for the year.

  • Report the income from the sale of business assets.
  • Salary paid to officers of the S-corp and to all other employees
  • Rents, Advertising, & Maintenance Expenses
  • Enter the Interest paid on loans
  • State income taxes, state franchise taxes, business property taxes, county and city taxes, payroll taxes, city business licenses, and business registration fees.
  • Costs for Employee benefit plans include health insurance benefits, group term life insurance benefits, meals, and more.
  • Other expenses such as travel, telephone service, or postage

3. Form 1120S Tax & Payments Reporting

This section helps to determine federal taxes that apply if the corporation was previously a C corporation (C-corp) or engaged in a tax-free reorganization with a C-corp.

Use Lines 22a through 27 of Form 1120-S to list the estimated taxes paid during the year and overpayments applied from the previous year.

4. Form 1120-S Schedule B, Other Information

  • Schedule B consists of various questions that require a yes or no response. The questions cover
  • major topics, such as accounting method, 
  • whether the S-corp owns stock in other corporations or partnerships, 
  • whether the S-corp has issued restricted stock,
  • whether the corporations filing Form 1099

5. Form 1120-S Schedule K, Shareholders’ Pro Rata Share Items

  • Use Schedule K to report the S-corp’s operating income, investment income, deductions, and annual credits.
  • Use the line 1 – 10 to report the non-business income and losses such as Net rental real estate income, Other gross rental income, and more
  • Use the line 11, & 12 to report the Section 179 deduction, and charitable contribution
  • From Lines 13 to 17 to enter the shareholder’s tax liability but don’t go directly into the calculation of net income on Form 1120-S.
  • Reconciliation: Line 18 summarizes all taxable income and deductions.

6. Form 1120S Schedule M-1 and M-2

This schedule helps S-Corporations to Reconcile the Income (Loss) per Books With Income
(Loss) per Return.

  • Schedule M-1 reports any differences between book accounting and tax returns.
  • Enter the net income, Expenses recorded on books not included in Schedule K, Travel and Entertainment 
  • Income recorded on books this year not included on Schedule K
  • Schedule M-2 is to determine the beginning balances on line 1 must match the ending balances
  • from the prior-year return

Form 1120-S Filing Methods

Form 1120-S can be filed electronically or by paper. 

  • If you choose to e-file 1120-S, you can choose an IRS Authorized software provider to prepare and file your Form 1120-S electronically. Click here to find the list of software providers that allows Form 1120-s electronic filing.
  • If you choose to file by paper, download the Form, print & mail it to the addresses mentioned here.

What is the late filing penalty for Form 1120-S?

The penalty for filing late, failure to file Form 1120S, or failure to provide complete information on the return is $195 per shareholder per month. The penalty can be evaluated for a maximum of 12 months.

Visit irs.gov to know more about S-Corporation tax return 1120-S.

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