Instructions for filing Form 1120-S: US Income Tax Return for an S Corporation

form 1120

What is Form 1120-S?

The IRS has a particular set of documents used by S corporations to report on financial transactions that occur during the tax year. That’s why we answer the question of what is form 1120-S here. Specifically, the IRS instructs S corporations to use Form 1120-S: U.S. Income Tax Return for an S Corporation, to report the income, gains, losses, deductions, credits, etc., of a domestic corporation or other entity for any tax year covered by an election to be an S corporation.

Those filing the form should note that several other forms associated with the 1120-S may also need to be completed and attached to the form as part of the tax reporting process. This form aims to ensure that all financial transactions are properly recorded and that the S corporation entity pays the proper tax amount for each fiscal year.

Who should file Form 1120-S?

Corporations and/or LLCs can elect to become an S corporation by filing IRS Form 2553. The S corporation designation is only valid when the IRS informs the corporation that it has accepted the election. One part of the form details the ownership percentage in the corporation, which is used to determine the profits and losses attributed to each shareholder in the S corporation. This brings us to the question of who needs to file 1120-S?

Form 1120-S is filed annually by the S corporation or its designee. The S Corporation allows the corporation to pass through its earnings, losses, credits, and deductions to shareholders for federal tax purposes. This avoids the double taxation that occurs with a C corporation, making the S corporation a good choice for sole proprietors and partnerships seeking to reduce their tax burden.

When is Form 1120-S due?

It’s critically important to know the form 1120-S due date to avoid penalties for filing the form late. Generally, an S corporation must file Form 1120-S by the 15th day of the 3rd month after the end of its tax year. In 2022 this deadline is March 15, 2022. The penalty for late filing is 5% of taxes owed, plus 0.5% for each month beyond the filing date. Note that if you are using a fiscal year that isn’t the calendar year, your tax filing deadline is different and depends on your business entity and when your fiscal year ends.

Where to File Form 1120-S

1120-S Forms can be filed electronically, or they can be physically mailed to the IRS. In either case, they should include payment of taxes due to avoid late payment penalties. The address used will depend on where the S corporation is domiciled and the total assets of the S corporation at the end of the calendar year. You can find the details on the IRS page linked here. In general, states located east of the Mississippi river send their returns to the Department of the Treasury Internal Revenue Service, Kansas City, MO 64999-0013, while those located west of the Mississippi, and those with assets above $10 million, send their returns to Department of the Treasury Internal Revenue Service, Ogden, UT 84201-0013.

Can I file Form 1120-S electronically?

Most corporations are not required to e-file their 1120-S Form and tax returns; however, providers and large taxpayers can become authorized to use the e-file system. Those S corporations who wish to file electronically must use approved software and/or a tax professional who is an Authorized e-file Provider. Tax professionals who want to e-file for their clients must submit a new electronic IRS e-file Application to become an Authorized IRS e-file Provider/Electronic Return Originator. The IRS does provide a list of software vendors who have products approved for electronic filing on the IRS e-file for Business Providers page. The listing contains addresses, phone numbers and links to their Web sites.

How to File Form 1120-S

Now that you know more about what is 1120-S, let’s tackle how to file Form 1120-S. Form 1120-S is available to download straight from the IRS website. Most tax filing software programs will also have the form available.

You will need the following information on hand while filling out Form 1120-S:

  • The date you became an S corporation
  • The date the business was incorporated
  • The corporation’s business activity code
  • The corporation’s employer identification number
  • The number of shareholders in the S corporation
  • Details about assets, profits, losses, credits, and deductions
  • Income statement
  • Balance sheet
  • Information about any fixed assets
  • Shareholder transaction listings
  • Income tax payments
  • Accounting method and whether it’s cash or accrual
  • Information about any stock the business owns

Some of this information is detailed and can be complicated if you aren’t financially inclined. To ensure the form is filled out correctly, it is recommended to work with a professional tax accountant or service.

Now let’s look at the pages included in Form 1120-S and how you would fill them out.

  1. Page 1

This first page is where you enter the basic information about your corporation, such as the incorporation date. It also asks about the deductions for the S corp, such as wages, advertising, and other expenses. It also asks for information about your taxes and payments.

Form 1120-S Page 1

Form 1120-S Page 1

  1. Schedule B

The following two pages are Schedule B, and there is a lot of information requested. The good news is that you may be able to skip over some of the questions, depending on the type of business you run. You’ll also need to know the business activity code and your accounting method and be able to provide a brief description of the product or service offered by your company. The rest of this section will ask specific questions about your shareholders and your corporation’s business dealings and payments.

Form 1120-S Page 2

Form 1120-S Page 2

  1. Schedule K

Schedule K is where you summarize shareholders’ income, deductions, and credits.

Form 1120-S Page 3

Form 1120-S Page 3

  1. Schedule L

You only need to complete Schedule L, a balance sheet, if you answered no to questions 11a and 11b on Schedule B. This shouldn’t be too difficult as the information should be easily accessible from your accounting software.

Form 1120-S Page 4

Form 1120-S Page 4

  1. Schedules M-1 and M-2

Did you complete Schedule L? Then you also need to complete Schedule M-1.

Schedule M-1 is where you report the income and losses in your accounting books to reconcile them with your tax return. This step is necessary because sometimes expenses like entertainment and meals aren’t included in your taxes. However, they may be registered as deductions in your accounting software. Schedule M-1 ensures everything matches.

Schedule M-2 is short, but it can be complicated. Its purpose is to calculate the company’s business balance, or what’s left after income and losses. That figure is calculated by subtracting the difference between your company’s income and losses from your balance at the beginning of the tax year.

Form 1120-S Page 5

Form 1120-S Page 5

Related 1120-S Tax Forms

Form Schedule K-1: Identifying the Percentage of Company Shares Owned

A corporation uses Schedule K-1 to report each shareholder’s portion of the income, deductions, credits and other items. This is done because each shareholder may be liable to pay tax on their share of the S corporation’s income, whether or not it has been distributed. The Schedule K-1 gives each shareholder the information they need to report to the IRS on their individual tax returns. Note that any money received as a share of S corporation income is not considered self-employment income. Thus it is not subject to self-employment tax. This is one of the benefits of using the S corporation formation.

Form 1065: US Return of Partnership Income Definition

Form 1065: U.S. Return of Partnership Income is a tax document used to declare the profits, losses, deductions, and credits of a business partnership. This form gives the IRS information about the financial status of the partnership over the course of the year. It allows the IRS to determine if the partners pay the appropriate income tax.

Form 1065 requires a significant amount of information regarding the annual financial status of the partnership. This includes income information such as gross receipts or sales. Deductions and operating expenses such as rent, employee wages, bad debts, interest on business loans, and other costs are also included. In addition, the form requires information about the partners and their stake in the company by the percentage of ownership.

Conclusion

Hopefully, this guide on Form 1120-S has helped you to better understand the requirements of the form, and why the IRS requires S corporations to complete and file it each year. Here at Lendstart we wish to provide you with the accurate information to assist with any financial matters. Feel free to come back to visit our site and learn more about taxes, loans, insurance, debt consolidation, and much more.

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Steven Walters Steven Walters Last update:
Steve has been writing in the financial products space for over a decade, with interests ranging from personal loans to investing. He is also deeply into the blockchain space. In his free time, you can find him in the kitchen preparing delicious meals, or outside hiking and biking.