Form 1120-S
Form 1120-S: US Income Tax Return for an S Corporation
The annual federal income tax return filed by S corporations, which pass income, deductions, and credits through to shareholders via Schedule K-1.
Who Files Form 1120-S
Every domestic corporation (or LLC) that has filed a valid Form 2553 S-Corp election. The S-Corp itself does not pay federal income tax (with limited exceptions), but it must file Form 1120-S annually and issue each shareholder a Schedule K-1 reporting their pro rata share of income, deductions, and credits.
What Form 1120-S Reports
Form 1120-S reports gross receipts, deductions, ordinary business income, and separately-stated items (interest, dividends, capital gains, Section 179 expense, charitable contributions). Each shareholder receives a K-1 reflecting their share. Active shareholder-employees must take reasonable W-2 compensation before drawing distributions, a frequent IRS audit focus.
Key Deadlines
- March 15: calendar-year S-Corp filing deadline (15th day of the 3rd month after year end)
- Six-month extension available via Form 7004
- September 15: extended S-Corp filing deadline (calendar year)
Common Mistakes
- Taking distributions without paying reasonable W-2 wages (the #1 S-Corp audit trigger)
- Missing built-in gains tax (BIG tax) on appreciated assets after C-Corp to S-Corp conversion
- Failing to maintain shareholder basis records, leading to incorrect loss deductions
- Late S-election filings without using Rev. Proc. 2013-30 relief
Best Practices
- Run the reasonable compensation analysis EVERY year, not just at the start of the engagement. Industry data, role, hours, and revenue all change.
- File Form 7203 (S-Corp Shareholder Stock and Debt Basis) with each shareholder return. Skipping it is a top current S-Corp audit trigger.
- Maintain shareholder loan documentation (note, interest rate, repayment terms) so loans qualify for debt basis instead of being recharacterized as additional capital.
- Coordinate state PTET elections at the entity level when available. Most states require an annual entity-level election by a specific deadline.
- For new shareholders or transfers, recompute the inside basis to outside basis reconciliation early in the year.
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2553
Form 2553
The IRS form used to elect S corporation tax status for an eligible domestic corporation or LLC, generally due within 75 days of the start of the tax year.
1065
Form 1065
The annual federal information return filed by partnerships and multi-member LLCs treated as partnerships, with income passed through to partners on Schedule K-1.
1120
Form 1120
The annual federal income tax return filed by C corporations to report income, deductions, and tax liability at the entity level.
Related Tax Terms
Form 1120-S (S Corporation Income Tax Return)
The annual federal income tax return filed by S corporations, which pass income, deductions, and credits through to shareholders via Schedule K-1.
S Corporation
A pass-through tax election under Subchapter S of the Internal Revenue Code that avoids corporate double taxation while allowing shareholder-employees to reduce self-employment tax.
Form 2553 (S Corporation Election)
The IRS form used to elect S corporation tax status for an eligible domestic corporation or LLC, generally due within 75 days of the start of the tax year.
Schedule K-1
A tax document issued by partnerships, S corporations, estates, and trusts to report each owner's share of income, deductions, credits, and other tax items.
Pass-Through Entity
A business entity that does not pay federal income tax at the entity level; instead, profits and losses pass through to owners who report them on their individual returns.
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