Form 1120-S is filed by S corporations under Subchapter S of Chapter 1 of the IRC. It reports profits, losses, credits, and deductions annually. These “pass-through” entities pass profits and losses to shareholders, who pay taxes on their personal returns, not the business. They avoid corporate tax. The form’s main purpose is to report income or tax status to federal authorities. It also issues Schedule K, detailing each shareholder’s income and losses for personal taxes.
Every business across the United States, depending upon its entity structure, follows a different taxation structure. Because the IRS has created segregated taxation methodologies for every kind of business, this entails different kinds of IRS tax forms. For all of the businesses that identify as S corporations, one of the most common forms that they must familiarize themselves with is Form 1120 S IRS. Because Form 1120-S directly impacts the business’s respective shareholder’s tax status.
For S corporations to ensure they stay year-round compliant, they must understand the critical details about their respective required tax form filing requirements. These requirements include the use of the specific tax forms required, the due date, the extension deadline, and more.
This blog answers those questions in detail to provide an in-depth guide for everything S-Corps need to know about tax form 1120 S.
What is Form 1120-S used for?
Form 1120S is a tax form for submitting by corporations who have chosen to be taxed under Subchapter S of Chapter 1 of the IRC. Through this tax form, the IRS will be informed on the earnings, losses, credits, and deductions of the S Corporation every year. A key component of entities required to file the tax form 1120-S is that those entities are referred to as “pass-through” entities. Compared to other entities such as C corporations, where the business is recognized as an individual, separated from its owner, and taxed accordingly, a pass-through entity is taxed by having its profits and losses passed to the shareholders. Hence, the business entity in itself doesn’t pay any corporate tax; instead, the shareholders pay their respective taxes on their personal income tax returns.
The main purpose of Form 1120-S is to report income or tax status to federal tax authorities. Additionally, in other cases Form 1120-S is used when issuing the Schedule K tax form when required. This Schedule K form is used to individually report the respective shareholder’s income and losses for their personal income tax returns.
What is Needed to File an S Corp Tax Return?
Filing an S Corp tax return requires businesses to gather a specific list of financial records and documentation proving their status as an IRS-recognized S Corporation. It also involves certain tax documents, Form 1120 S corporation, and shareholder details. The following section lists out other important information and documents that S Corporations require when filing their tax return:
- Employer Identification Number (EIN): This is your company’s unique federal tax identification number, which is essential for accurately identifying your business when filing any tax forms with the Internal Revenue Service (IRS).
- General Business Details: Ensure you have the official date of your incorporation documented, along with the exact date when the IRS approved your S Corporation election. Additionally, be prepared with your principal business activity code.
- Financial Statements: Create a full balance sheet as well as a profit and loss statement (also referred to as an income statement). These financial statements need to contain your business’ income, expenses, assets, and liabilities for the whole tax year.
- Accounting Method: Find out which method of accounting does your business follow; cash method or accrual method.
- Payroll Information: Collect all W-2 Form statements that include the total amount of wages that your business paid to its employees in a tax year as well as the payroll taxes deducted from their salaries.
- Contractor Payments: Collect the total payment records for all independent contractors who received a payment of $600 or more during the tax year.
- Schedule K-1: This is used to show the percentage of the income, expenses, and credits of the corporation to be shared by each stockholder. You need to file a Schedule K-1 for all stockholders and provide them with copies.
- Tax Forms: You should make it a point to check the particular requirement of the state where your business is operating, because in some states, the tax forms need to be filed along with the annual report or franchise tax of the S corporation.
What is the Deadline for Filing Form 1120-S?
Filing of form 1120-S should be done by March 15th each year. However, if S corporation fails to file on time, there will always be an extension of time. Filing for this extension requires a separate Form 7004. The table below presents all of the significant dates that businesses must be on the lookout for as important tax deadlines in their calendars:
| Filing of Tax Documents | Deadline for Tax Documents (by Calendar Year) | Deadline for Fiscal Year | Deadline after Extension (Using Form 7004) |
|---|---|---|---|
| Form 1120-S (S-Corporation Return) | March 15 | 15th day of the 3rd month after the tax year ends | September 15 |
| Schedule K-1 (Submitted to Shareholders) | March 15 | 15th day of the 3rd month after the tax year ends | September 15 |
| Form 7004 (Application for Extension) | March 15 | Not Applicable (Must be filed by the original due date of the return) | Not Applicable (Must be filed by March 15) |
What is the Penalty for Late Filing an 1120-S Return?
Failing to file form 1120-S (S Corporation U.S. income tax return) by 2026 results in a penalty of $255 per month per stockholder. Even though the company is exempted from the regular corporate tax, the fine affects the company directly and not the shareholders. The following table illustrates the process of how this penalty is calculated:
| Penalty Feature | Detail |
|---|---|
| Base Rate | $255 per shareholder per month (or partial month) late |
| Maximum Duration | Up to 12 months |
| Late Over 60 Days Rule | Lesser of the tax due or $525 if more than 60 days late |
| Who Pays | Assessed directly against the S corporation |
Key Takeaways
1120-S Form is one of the main requirements which should be followed by S corporation, according to the previous blog post. The main reason for this is that through the filing of Form 1120-S, all the income, deductions, credits, as well as the distribution of money to the stockholders will be recorded. Through the proper completion of Form 1120-S, the possibility of penalties on S corporations can be avoided.
It is also necessary for shareholders to know about Form 1120 S and their duties in connection with this form. Every shareholder should include his/her portion of income or loss from the corporation in a personal income tax return, since Form 1120-S is a pass-through entity. This shows how essential it is to be aware of duties and obligations in connection with this form. If shareholders and S corporations meet all filing requirements, then it will help to establish good relationships with tax authorities.
Frequently Asked Questions
The title of the tax form that is used to determine the income, deduction, and credits of the S corporation is Form 1120-S, and the tax form that is filed using Form 1120-S to determine the amount of income, deductions, and credits of the particular shareholder in the corporation is Schedule K-1. In other words, Form 1120-S is the tax form for the business, whereas Schedule K-1 is the tax form for the individual.
Form 1120-S is filed by the S corporation, which is not subject to any taxation, and this form helps to allocate income and loss to individuals. The Form 1065 is another pass-through form but this one is filled by the multi member partnerships and multi member LLCs. The Form 1120 is filled in by the C corporation that has its own income tax which it needs to pay and hence the dividends become double taxed.
The K-1 schedule is used by S corporations to record their shares of income, deductions, losses, and credits. An S corporation will file its return using Form 1120-S with the IRS while issuing a separate Schedule K-1 to each of its shareholders. The shareholders will use the information recorded on their respective Schedule K-1 for filing tax returns.
To fill in Form 1120-S, gather all information related to your corporation’s income, expenses, and assets, as well as total income and deductions from business activities. Fill in the standard corporate tax return form together with individual Schedule K-1 for all the shareholders holding shares of your corporation in the current tax year. Submit the forms to the Internal Revenue Service not later than March 15 (or ask for an extension by filing Form 7004.
An LLC doesn’t have a single tax form assigned to it. The IRS treats the LLC as a disregarded entity in the case of a single member or as a partnership in the case of multiple members. The LLC can decide how it should be taxed. In case the LLC opts for corporate tax, then Form 1120 should be filed together with Form 8832. However, in case the LLC opts for income and loss pass-through treatment, Form 1120-S should be filed together with Form 2553.
The cost of a 1120-S tax return varies greatly depending on the size and complexity of the business. It also depends on geographical location and whether advisory services are included in the service exchange. The typical cost of preparing and filing a Form 1120-S tax return ranges from $800 to $3,500. However, by outsourcing the 1120-S tax return, the cost can be brought down anywhere between $800 and $2,500.
