What Is Form 1120-S: U.S. Income Tax Return for an S Corporation?

What Is Form 1120-S: U.S. Income Tax Return for an S Corporation?

Let me explain Form 1120-S directly: it's the tax document you use if you're running an S corporation to report your income, gains, losses, credits, deductions, and other key details to the IRS. You have to file it by the 15th day of the third month after your corporation's tax year ends.

Key Takeaways

As an S corporation owner, you file Form 1120-S annually to handle your business's tax reporting. This form covers your income, gains, losses, credits, deductions, and more. Remember, it must include Schedule K-1, which breaks down profits and losses for each shareholder. You'll need to provide your company's details, income, deductions, taxes, and payments on the form. You can file it electronically or by mail.

Who Needs to File IRS Tax Form 1120-S?

If your corporation has elected S status and the IRS has accepted it, you must file Form 1120-S. An S corporation is a setup under U.S. tax code for smaller businesses with no more than 100 shareholders. It's a pass-through entity, meaning the corporation itself doesn't pay taxes—instead, you and your shareholders handle the tax liabilities personally.

The IRS looks at the ownership percentages in Form 1120-S to figure out how much profit and loss goes to each shareholder. If a shareholder's share percentage stays the same all year, calculating their portion is straightforward. But if they buy, sell, or transfer shares during the year, you prorate the profits and losses on a per-share basis.

Here's something important: the S corporation structure lets you pass income, losses, deductions, and credits straight to shareholders for federal taxes, avoiding double taxation since only the individuals get taxed, not the corporation.

Information Included on Form 1120-S

When you file Form 1120-S, you're reporting your S corporation's income, gains, losses, credits, deductions, and other details to the IRS each year.

The form requires basic business info like your corporation's name, mailing address, employer identification number (EIN), date of incorporation, total assets, the effective date of your S election, and your business activity code.

Beyond that, the form covers sections on income—like receipts, sales, returns, allowances, gross profit, and other income. For deductions, it includes compensation, salaries, wages, repairs, bad debts, rents, taxes, depreciation, advertising, pensions, and more. Then there's tax and payments, covering things like excess net passive income and estimated tax penalties.

More on Schedule K-1

You must attach Schedule K-1 to Form 1120-S for every shareholder. This schedule lists each shareholder and their allocated share of income, profits, losses, credits, and deductions. That info then goes on each shareholder's personal tax return.

How to File Form 1120-S

You can file Form 1120-S electronically each year. If you're a small business owner, you might handle it yourself with tax software—most programs cost something, but they're often cheaper than hiring a pro.

For S corporations with complex taxes, you might want a tax preparer or accountant to do it, which cuts down on errors.

Be aware: the IRS prefers electronic filing and still accepts paper by mail, but paper can cause delays. You can download all pages of Form 1120-S from the IRS website.

What Is the Purpose of Form 1120-S?

Form 1120-S is simply the tax return for S corporations. You use it to report income, profits, losses, tax credits, deductions, and other info to the IRS. File it electronically or by mail, and always include Schedule K-1, which details each shareholder's allocations.

Who Files Form 1120-S?

S corporations file Form 1120-S, but only after the IRS approves their S election. This is for businesses with fewer than 100 shareholders. You or a tax pro can prepare it, and submit electronically or by mail.

When Is Form 1120-S Due?

You need to file Form 1120-S by the 15th of the third month after your tax year ends. For a calendar year from January 1 to December 31, that's March 15. If your year is July 1 to June 30, it's due September 15.

The Bottom Line

Every entity, including your S corporation, has to report taxes annually to the IRS. Form 1120-S is what you use if you have fewer than 100 shareholders and pass income and losses to them. File electronically or by mail with Schedule K-1, and get it in by the 15th of the third month after your tax year ends.