What is Form 1120-S?
The U.S. Income Tax Return for an S Corporation, or Form 1120-S, is used by S corporations in order for them to state any income, gains, losses, deductions, credits, and other information belonging to domestic corporations alike for every tax year they are registered as an S corporation.
An S corporation is a kind of corporation that does not pay any income taxes because they are elected to be taxed under subchapter S of Chapter 1 of the Internal Revenue Code. Form 1120-S is for S corporations and businesses registered as such and, therefore, avoid any double taxation. Since S corporations’ incomes pass through to the owners, the S corporations’ income is stated on the shareholder’s personal income tax returns, meaning they do not pay corporate taxes but, instead, are taxed at the owners’ personal income tax rate.
Who should file Form 1120-S?
Form 1120-S should be filed by S corporations. The structure of S corporations allows the corporation to pass income, losses, deductions, and credits through to the shareholders.
If a corporation is elected to be an S corporation by completion and submission of Form 2553 and the Internal Revenue Service (IRS) has accepted their application, that corporation must also file and accomplish Form 1120-S. With the use of Form 1120-S, the IRS would be able to know the ownership percentage in the corporation and allocate accurately the profits and losses each shareholder of the corporation should get.
What is the purpose of Form 1120-S?
Aside from stating the profits and losses, Form 1120-S is crucial for S corporations because, as mentioned, it informs the IRS of the ownership percentage of each individual shareholder and allocates these profits and losses accordingly. This will help in determining any tax payments or refunds due to the individual shareholders on their personal income tax returns. The reason why corporations and businesses apply to be taxed as S corporations is to pass the tax liabilities onto the business’ owners, so letting the IRS know about the individual ownership of each shareholder guarantee that the business or corporation would actually secure this benefit.
Corporations that have less than one-hundred (100) shareholders may opt to apply to be an S corporation for the purpose of avoiding double federal taxation.
Where can I get a copy of Form 1120-S?
You can get a copy of Form 1120-S above by downloading the document form. You may also choose to fill it out online using our PDF Editor.
Where should I file Form 1120-S?
You can file the form electronically or mail it to the IRS.
When should I file Form 1120-S?
As a general rule, an S corporation should file their Form 1120-S by the fifteenth (15th) day of the third (3rd) month after the end of its tax year.
Unless you have submitted an application for extension, the deadline for filing Form 1120-S is on March 15, 2021.
How do I fill out Form 1120-S?
Before you begin accomplishing Form 1120-S, here is a list of documents that you may need access to, to complete the form accurately:
- Date of incorporation
- A list of your business’ products and/or services
- Business activity code
- Your Employer Identification Number (EIN)
- The complete date of when your business was elected for an S corporation status (if your business operates on a calendar-year basis, input January 1.)
- A profit and loss statement and balance sheet
- Your accounting method
- Independent contract payments (payments made to freelancers, independent contractors, or self-employed workers alike that amount to at least $600 for the year. Provide them with 1099 forms).
Once you have these documents and the necessary information you will be needing from them, begin accomplishing the form. Provide and report only accurate, valid, and true statements on Form 1120-S.
Form 1120-S consists of eight (8) parts that need to be filled out. For information on how to complete each section of the form, please refer to the guide below.
- With your corporation’s full name and address, provide your Employer Identification Number (EIN), the date wherein your S election came into effect, business activity code, and the date of incorporation.
Income and Deductions
- In this section of the form, total in the profits or losses of your corporation for the tax year based on the revenue generated and the expenses incurred. Keep in mind that you may find the following information on your profit and loss statement.
Tax and Payments
- Only fill out this section of the form if your business was a C corporation during the tax year, but then applied to be an S corporation again.
- After providing the accounting method (cash or accrual) of your corporation along with the kind of business it is, you will be asked questions that will need ‘yes’ or ‘no’ answers. These questions will be regarding matters like ownership of stocks and entities alike, if you’ve hired/worked with self-employed workers like freelancers and independent contractors, and whether you have had any modified or forgiven debt.
- Please note that Question 10 of this section is especially crucial. Please be advised that if the total receipts and total assets of the tax year fall below the amount of $250,000, you, then, do not have to fill out the “Balance Sheets per Book” section and the “Reconciliation of Income (Loss) per Books with Income (Loss) per Return.”
Shareholders’ Pro Rata Share Items Section
- Report the summary of the income, credits, and deductions of your corporation’s shareholders. Please be advised that each individual shareholder of the corporation/business needs to attach their own Schedule K-1 to present their individual ownership of the corporation/business.
Balance Sheet per Books
- This section is to be filled out only if your total receipts and assets for the tax year amount to $250,000 or more. This section is for reporting the corporation’s/business’s year-end assets, liabilities, and equity. For ease of accessing these amounts, refer to your corporation’s/business’s balance sheet.
Reconciliation of Income (Loss) per Books with Income (Loss) per Return
- Again, only complete this part of the form if your total receipts and assets amount for the tax year amount to $250,000 or more. This section of the form is for the IRS to know the loss between the income reported on the corporation’s/business’s records and the loss reported on your return.
Schedule M-2 – Analysis of Accumulated Adjustments Account, Other Adjustments Account, and Shareholders’ Undistributed Taxable Income Previously Taxed
- Only fill this section out if your corporation was ever a C corporation. This section of the form is for stating any adjustments or differences in a shareholder’s capital accounts during the tax year.