Fill in a Valid IRS 1120-S Template

The IRS 1120-S form is a tax return specifically designed for S corporations, allowing them to report income, deductions, and credits while avoiding taxation at the corporate level. This form is essential for S corporations to pass income directly to shareholders, who then report it on their personal tax returns. Understanding its requirements can ensure compliance and optimize tax benefits; start filling out the form by clicking the button below.

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The IRS 1120-S form serves a crucial role in the tax reporting process for S corporations in the United States. As a pass-through entity, an S corporation allows income, losses, deductions, and credits to be reported directly on the shareholders' tax returns, thereby avoiding double taxation at the corporate level. This form must be completed annually to provide the IRS with the corporation’s financial activities for the year. It includes essential information such as corporate income, expenditures, and the distribution of income among shareholders. Each shareholder receives a Schedule K-1, outlining their portion of the corporation’s income, deductions, and other tax items, which they then report on their individual tax returns. Filing this form accurately and on time is vital for compliance and can affect the shareholders' tax liabilities. Thus, it’s important for S corporations to understand the requirements and particular details that accompany the 1120-S form to ensure proper filing and adherence to IRS regulations.

IRS 1120-S Example

Form 1120-S

Department of the Treasury Internal Revenue Service

U.S. Income Tax Return for an S Corporation

Do not file this form unless the corporation has filed or

is attaching Form 2553 to elect to be an S corporation.

Go to www.irs.gov/Form1120S for instructions and the latest information.

OMB No. 1545-0123

2019

For calendar year 2019 or tax year beginning							, 2019, ending			, 20
A S election effective date					Name					D Employer identification number
			TYPE
B	Business activity code		TYPE		Number, street, and room or suite no. If a P.O. box, see instructions.					E Date incorporated
B	Business activity code		OR							E Date incorporated
	number (see instructions)		OR
	number (see instructions)		PRINT
			PRINT
					City or town, state or province, country, and ZIP or foreign postal code					F Total assets (see instructions)

C Check if Sch. M-3 attached										$
G	Is the corporation electing to be an S corporation beginning with this tax year?							Yes	No If “Yes,” attach Form 2553 if not already filed
H	Check if: (1)	Final return		(2)	Name change (3)	Address change	(4)	Amended return (5)		S election termination or revocation
I	Enter the number of shareholders who were shareholders during any part of the tax year
J	Check if corporation: (1)			Aggregated activities for section 465 at-risk purposes			(2)	Grouped activities for section 469 passive activity purposes

Caution: Include only trade or business income and expenses on lines 1a through 21. See the instructions for more information.

Deductions (see instructions for limitations) Income

Tax and Payments

1a	Gross receipts or sales		1a
b	Returns and allowances		1b
c	Balance. Subtract line 1b from line 1a	. . . . . . . .			1c
2	Cost of goods sold (attach Form 1125-A)	. . . . . . . .			2
3	Gross profit. Subtract line 2 from line 1c	. . . . . . . .			3
4	Net gain (loss) from Form 4797, line 17 (attach Form 4797)	. . . . . . . .			4
5	Other income (loss) (see instructions—attach statement)	. . . . . . . .			5
6	Total income (loss). Add lines 3 through 5	. . . . . . .			6
7	Compensation of officers (see instructions—attach Form 1125-E) . . .	. . . . . . . .			7
8	Salaries and wages (less employment credits)	. . . . . . . .			8
9	Repairs and maintenance	. . . . . . . .			9
10	Bad debts	. . . . . . . .			10
11	Rents	. . . . . . . .			11
12	Taxes and licenses	. . . . . . . .			12
13	Interest (see instructions)	. . . . . . . .			13
14	Depreciation not claimed on Form 1125-A or elsewhere on return (attach Form 4562)				14
15	Depletion (Do not deduct oil and gas depletion.)	. . . . . . . .			15
16	Advertising	. . . . . . . .			16
17	Pension, profit-sharing, etc., plans	. . . . . . . .			17
18	Employee benefit programs	. . . . . . . .			18
19	Other deductions (attach statement)	. . . . . . . .			19
20	Total deductions. Add lines 7 through 19	. . . . . . .			20
21	Ordinary business income (loss). Subtract line 20 from line 6 . . . .	. . . . . . . .			21
22a	Excess net passive income or LIFO recapture tax (see instructions) . . .		22a
b	Tax from Schedule D (Form 1120-S)		22b
c	Add lines 22a and 22b (see instructions for additional taxes)	. . . . . . . .			22c
23a	2019 estimated tax payments and 2018 overpayment credited to 2019 .		23a
b	Tax deposited with Form 7004		23b
c	Credit for federal tax paid on fuels (attach Form 4136)		23c
d	Reserved for future use		23d
e	Add lines 23a through 23d	. . . . . . . .			23e
24	Estimated tax penalty (see instructions). Check if Form 2220 is attached .	. . . . . .			24
25	Amount owed. If line 23e is smaller than the total of lines 22c and 24, enter amount owed . . .				25
26	Overpayment. If line 23e is larger than the total of lines 22c and 24, enter amount overpaid . . .				26
27	Enter amount from line 26: Credited to 2020 estimated tax			Refunded	27

Sign Here

Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.

F			F		May the IRS discuss this return
					May the IRS discuss this return
					with the preparer shown below?
	Signature of officer	Date		Title	See instructions.	Yes	No

Paid	Print/Type preparer’s name	Preparer’s signature		Date	Check	if	PTIN
					Check	if
					self-employed
Preparer					self-employed

	Firm’s name				Firm’s EIN
Use Only	Firm’s name				Firm’s EIN
Use Only	Firm’s address				Phone no.
	Firm’s address				Phone no.
For Paperwork Reduction Act Notice, see separate instructions.			Cat. No. 11510H				Form 1120-S (2019)


Form 1120-S (2019)					Page 2
Schedule B	Other Information (see instructions)
1 Check accounting method: a		Cash	b	Accrual	Yes No

c Other (specify)

2 See the instructions and enter the:

a Business activity

b Product or service

3At any time during the tax year, was any shareholder of the corporation a disregarded entity, a trust, an estate, or a nominee or similar person? If “Yes,” attach Schedule B-1, Information on Certain Shareholders of an S Corporation . .

4At the end of the tax year, did the corporation:

aOwn directly 20% or more, or own, directly or indirectly, 50% or more of the total stock issued and outstanding of any foreign or domestic corporation? For rules of constructive ownership, see instructions. If “Yes,” complete (i) through (v)

below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(i) Name of Corporation	(ii) Employer	(iii) Country of	(iv) Percentage of	(v) If Percentage in (iv) Is 100%, Enter
	Identification	Incorporation	Stock Owned	the Date (if any) a Qualified Subchapter
	Number (if any)			S Subsidiary Election Was Made

bOwn directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in the profit, loss, or capital in any foreign or domestic partnership (including an entity treated as a partnership) or in the beneficial interest of a trust? For rules of constructive ownership, see instructions. If “Yes,” complete (i) through (v) below . . . . . . .

(i) Name of Entity	(ii) Employer	(iii) Type of Entity	(iv) Country of	(v) Maximum Percentage Owned
	Identification		Organization	in Profit, Loss, or Capital
	Number (if any)

5a At the end of the tax year, did the corporation have any outstanding shares of restricted stock? . . . . . . . .

If “Yes,” complete lines (i) and (ii) below.

(i)	Total shares of restricted stock
(ii)	Total shares of non-restricted stock

bAt the end of the tax year, did the corporation have any outstanding stock options, warrants, or similar instruments? . If “Yes,” complete lines (i) and (ii) below.

(i)

Total shares of stock outstanding at the end of the tax year

(ii)Total shares of stock outstanding if all instruments were executed

6Has this corporation filed, or is it required to file, Form 8918, Material Advisor Disclosure Statement, to provide

	information on any reportable transaction?	. . . . . . . . . . . . . . . . . . . . . . . .
7	Check this box if the corporation issued publicly offered debt instruments with original issue discount . . . .
	If checked, the corporation may have to file Form 8281, Information Return for Publicly Offered Original Issue Discount
	Instruments.

8If the corporation (a) was a C corporation before it elected to be an S corporation or the corporation acquired an asset with a basis determined by reference to the basis of the asset (or the basis of any other property) in the hands of a C corporation and

(b) has net unrealized built-in gain in excess of the net recognized built-in gain from prior years, enter the net unrealized built-in

gain reduced by net recognized built-in gain from prior years. See instructions

9Did the corporation have an election under section 163(j) for any real property trade or business or any farming business

	in effect during the tax year? See instructions
10	Does the corporation satisfy one or more of the following? See instructions

aThe corporation owns a pass-through entity with current, or prior year carryover, excess business interest expense.

bThe corporation’s aggregate average annual gross receipts (determined under section 448(c)) for the 3 tax years preceding the current tax year are more than $26 million and the corporation has business interest expense.

cThe corporation is a tax shelter and the corporation has business interest expense. If “Yes,” complete and attach Form 8990.

11 Does the corporation satisfy both of the following conditions? . . . . . . . . . . . . . . . . . .

aThe corporation’s total receipts (see instructions) for the tax year were less than $250,000. b The corporation’s total assets at the end of the tax year were less than $250,000.

If “Yes,” the corporation is not required to complete Schedules L and M-1.

Form 1120-S (2019)

Form 1120-S (2019)		Page 3
Schedule B	Other Information (see instructions) (continued)	Yes No

12During the tax year, did the corporation have any non-shareholder debt that was canceled, was forgiven, or had the

terms modified so as to reduce the principal amount of the debt? . . . . . . . . . . . . . . . . .

If “Yes,” enter the amount of principal reduction

13During the tax year, was a qualified subchapter S subsidiary election terminated or revoked? If “Yes,” see instructions .

14a	Did the corporation make any payments in 2019 that would require it to file Form(s) 1099?
b	If “Yes,” did the corporation file or will it file required Form(s) 1099?
15	Is the corporation attaching Form 8996 to certify as a Qualified Opportunity Fund?
	If “Yes,” enter the amount from Form 8996, line 14	$

Schedule K

Shareholders’ Pro Rata Share Items

Ordinary business income (loss) (page 1, line 21)

Net rental real estate income (loss) (attach Form 8825)

Other gross rental income (loss)

. . . . . . .

Expenses from other rental activities (attach statement)

. . . .

(Loss)

Other net rental income (loss). Subtract line 3b from line 3a

Interest income

Dividends: a Ordinary dividends

Income

b Qualified dividends

. . . . . . .

Royalties

Net short-term capital gain (loss) (attach Schedule D (Form 1120-S))

. . . . . . . .

Net long-term capital gain (loss) (attach Schedule D (Form 1120-S))

Collectibles (28%) gain (loss)

. . . . . . .

Unrecaptured section 1250 gain (attach statement)

Net section 1231 gain (loss) (attach Form 4797)

Other income (loss) (see instructions) . . .

Type

Deductions

Section 179 deduction (attach Form 4562)

12a

Charitable contributions

Investment interest expense

Section 59(e)(2) expenditures (1) Type

(2) Amount

Other deductions (see instructions) . . . .

Type

13a

Low-income housing credit (section 42(j)(5))

Low-income housing credit (other)

Credits

Qualified rehabilitation expenditures (rental real estate) (attach Form 3468, if applicable) . .

Other rental real estate credits (see instructions)

Type

Other rental credits (see instructions) . . .

Type

Biofuel producer credit (attach Form 6478)

. . . . . . . . . . . . . . . .

Other credits (see instructions)

Type

14a

Name of country or U.S. possession

Gross income from all sources

Gross income sourced at shareholder level

Foreign gross income sourced at corporate level

Reserved for future use

Foreign branch category

Passive category

. . . . . . . . . . . . . . . . . . . . . . . .

Transactions

General category

. . . . . . . . . . . . . . . . . . . . . . . .

Other (attach statement)

Deductions allocated and apportioned at shareholder level

Interest expense

Foreign

Other

Deductions allocated and apportioned at corporate level to foreign source income

Reserved for future use

Foreign branch category

Passive category

. . . . . . . . . . . . . . . . . . . . . . . .

General category

. . . . . . . . . . . . . . . . . . . . . . . .

Other (attach statement)

Other information

Total foreign taxes (check one):

Paid

Accrued

Reduction in taxes available for credit (attach statement)

rOther foreign tax information (attach statement)

Total amount

12a

12b

12c(2)

12d

13a

13b

13c

13d

13e

13f

13g

14b

14c

14d

14e

14f

14g

14h

14i

14j

14k

14l

14m

14n

14o

14p

14q

Form 1120-S (2019)

Page 4

Schedule K					Shareholders’ Pro Rata Share Items (continued)
	MinimumTax		Items(AMT)	15a	Post-1986 depreciation adjustment
Alternative				b	Adjusted gain or loss
Alternative				c	Depletion (other than oil and gas)
				c	Depletion (other than oil and gas)
				d	Oil, gas, and geothermal properties—gross income
				e	Oil, gas, and geothermal properties—deductions
AffectingItems	Shareholder		Basis	f	Other AMT items (attach statement)
AffectingItems	Shareholder		Basis	e	Repayment of loans from shareholders
				16a	Tax-exempt interest income
				b	Other tax-exempt income
				c	Nondeductible expenses
Other		Information		d	Distributions (attach statement if required) (see instructions)
Other		Information		d	Other items and amounts (attach statement)
				17a	Investment income
				b	Investment expenses
				c	Dividend distributions paid from accumulated earnings and profits
Recon-		ciliation		18	Income (loss) reconciliation. Combine the amounts on lines 1 through 10 in the far right
				18
					column. From the result, subtract the sum of the amounts on lines 11 through 12d and 14p .

Total amount

15a

15b

15c

15d

15e

15f

16a

16b

16c

16d

16e

17a

17b

17c


Schedule L		Balance Sheets per Books		Beginning of tax year				End of tax year
		Assets		(a)		(b)	(c)			(d)
1	Cash
2a	Trade notes and accounts receivable . . .
b	Less allowance for bad debts		(	)			(	)
3	Inventories
4	U.S. government obligations
5	Tax-exempt securities (see instructions) . .
6	Other current assets (attach statement) . . .
7	Loans to shareholders
8	Mortgage and real estate loans
9	Other investments (attach statement) . . .
10a	Buildings and other depreciable assets . . .
b	Less accumulated depreciation		(	)			(	)
11a	Depletable assets
b	Less accumulated depletion		(	)			(	)
12	Land (net of any amortization)
13a	Intangible assets (amortizable only) . . . .
b	Less accumulated amortization		(	)			(	)
14	Other assets (attach statement)
15	Total assets
	Liabilities and Shareholders’ Equity
16	Accounts payable
17	Mortgages, notes, bonds payable in less than 1 year
18	Other current liabilities (attach statement) . .
19	Loans from shareholders
20	Mortgages, notes, bonds payable in 1 year or more
21	Other liabilities (attach statement) . . . .
22	Capital stock
23	Additional paid-in capital
24	Retained earnings
25	Adjustments to shareholders’ equity (attach statement)
26	Less cost of treasury stock				(	)			(	)
27	Total liabilities and shareholders’ equity . .

Form 1120-S (2019)

Form 1120-S (2019)		Page 5
Schedule M-1	Reconciliation of Income (Loss) per Books With Income (Loss) per Return

Note: The corporation may be required to file Schedule M-3. See instructions.

1	Net income (loss) per books . . . .

2Income included on Schedule K, lines 1, 2, 3c, 4, 5a, 6, 7, 8a, 9, and 10, not recorded on books this year (itemize)

3Expenses recorded on books this year not included on Schedule K, lines 1 through 12 and 14p (itemize):

aDepreciation $

bTravel and entertainment $

4 Add lines 1 through 3 . . . . . .

5Income recorded on books this year not included on Schedule K, lines 1 through 10 (itemize):

aTax-exempt interest $

6Deductions included on Schedule K, lines 1 through 12 and 14p, not charged against book income this year (itemize):

aDepreciation $

7 Add lines 5 and 6 . . . . . . .

8Income (loss) (Schedule K, line 18).

Subtract line 7 from line 4 . . . .

Schedule M-2 Analysis of Accumulated Adjustments Account, Shareholders’ Undistributed Taxable Income Previously Taxed, Accumulated Earnings and Profits, and Other Adjustments Account

(see instructions)

		(a) Accumulated		(b) Shareholders’	(c) Accumulated	(d) Other adjustments
		adjustments account		undistributed taxable	earnings and profits		account
				income previously taxed
1	Balance at beginning of tax year
1	Balance at beginning of tax year
2	Ordinary income from page 1, line 21 . . .
3	Other additions
4	Loss from page 1, line 21	(	)
5	Other reductions	(	)			(	)
6	Combine lines 1 through 5
7	Distributions
8	Balance at end of tax year. Subtract line 7 from
	line 6
							Form 1120-S (2019)

Click for IRS 1120-S File

File Breakdown

Fact Name	Description
Purpose	The IRS 1120-S form is used by S Corporations to report their income, deductions, and credits to the IRS.
Eligibility	Only S Corporations, which meet specific IRS criteria, can file Form 1120-S. These criteria include limitations on the number of shareholders and types of stock issued.
Filing Deadline	The filing deadline for the IRS 1120-S form is typically March 15 for calendar year corporations. Extensions may be granted through Form 7004.
State Forms	Many states require a separate form for S Corporation tax filings. Each state’s specific rules vary based on local tax laws.
Distribution of Income	S Corporations do not pay federal income tax at the corporate level. Instead, income passes through to shareholders who report it on their personal tax returns.
Governing Laws	Connecticut: Conn. Gen. Stat. §12-217; California: Cal. Rev & Tax Code §23801; New York: N.Y. Tax Law §660.

Guide to Using IRS 1120-S

Completing the IRS 1120-S form is an essential step for S corporations to report income, gains, losses, credits, and deductions. By carefully following the instructions below and gathering the necessary information, shareholders can ensure their form is filled out accurately and submitted on time.

Gather your corporation's financial statements, including income statements and balance sheets, for the tax year.
Collect information on all shareholders, including their names, addresses, and ownership percentages.
Begin filling out the form with your corporate name, address, and Employer Identification Number (EIN) at the top of the first page.
Enter the date your corporation was incorporated and the total number of shareholders.
Complete Part I by reporting your corporation's income, including gross receipts and any other income earned.
In Part II, list the deductions your corporation incurred throughout the year, such as salaries, rent, and utilities.
Calculate the line items on the form carefully to determine your corporation's net income or loss.
Proceed to Part III to report other tax credits or deductions the corporation may qualify for.
Ensure you complete all applicable schedules that accompany the 1120-S form, such as Schedule K and Schedule L.
Review the entire document thoroughly for accuracy before signing and dating the form at the bottom.
Submit the completed form electronically or by mailing it to the appropriate IRS address, ensuring you keep a copy for your records.

Get Answers on IRS 1120-S

What is the IRS Form 1120-S?

The IRS Form 1120-S is a tax return that S corporations use to report income, deductions, and credits to the IRS. An S corporation is a special type of corporation that allows income, losses, and deductions to be passed through to shareholders, avoiding double taxation at the corporate level. The form is essential for maintaining compliance with federal tax laws and must be filed annually.

Who should file Form 1120-S?

Form 1120-S is specifically designed for S corporations. To qualify as an S corporation, a business must meet certain criteria, including:

Being a domestic corporation.
Having no more than 100 shareholders.
Having only eligible shareholders, which includes individuals, certain trusts, and estates.
Having only one class of stock.

If a corporation meets these requirements, it can elect to be treated as an S corporation by filing Form 2553, and subsequently, it will need to file Form 1120-S annually.

When is Form 1120-S due?

Form 1120-S is typically due on the 15th day of the third month after the end of the corporation's tax year. For corporations following the calendar year, the due date is March 15. If that date falls on a weekend or holiday, the deadline extends to the next business day. Extensions can be requested using Form 7004, which allows for an additional six months to file.

What information is required on Form 1120-S?

Filing Form 1120-S requires detailed information about the S corporation's financial activities. Key sections include:

General information about the corporation, including name, address, and EIN.
Income section, which captures gross receipts and any other income.
Deductions section, where the corporation lists eligible expenses to reduce taxable income.
Shareholder information, detailing shares owned and how income is allocated.

Corporations must provide accurate figures to avoid penalties and ensure compliance with IRS regulations.

What are the consequences of not filing Form 1120-S?

Failing to file Form 1120-S can lead to significant consequences. The IRS can impose penalties for late filing or failure to file, which typically starts at $210 per month for each month the return is late, up to a maximum of 12 months. Moreover, the S corporation may lose its S status if it fails to comply with filing requirements for three consecutive years. This can result in double taxation on corporate income, significantly increasing the tax burden on shareholders.

Common mistakes

When filling out the IRS 1120-S form, which is used by S corporations to report income, deductions, and other important information, it's crucial to pay attention to detail. One common mistake is not properly reporting all sources of income. S corporations must include income from all types of business activities. If a business fails to report even one source, it can lead to penalties or an audit. Make sure to cross-check your income against your financial records before submitting the form.

Another frequent error is miscalculating shareholder basis. Each shareholder's basis affects their tax liability and the amount of loss they can deduct. If someone incorrectly calculates their shareholder basis, it can result in overreporting or underreporting income, leading to complications down the line. It's advisable to keep detailed records of stock purchases and other adjustments to shareholder's equity to avoid this pitfall.

Additionally, many people neglect to sign and date their form. An unsigned or undated form can lead to it being considered invalid by the IRS. Be sure to review the signature section carefully and ensure that all necessary signatures are present. This small step can save a lot of frustration later when awaiting confirmation from the IRS.

Finally, a common mistake is missing the deadlines for filing. The IRS has specific dates when the 1120-S form must be submitted, usually March 15 for most businesses. Failing to file on time can incur fines and additional interest on any taxes owed. Setting reminders well in advance can be beneficial in adhering to these deadlines. Staying organized will simplify the filing process.

Documents used along the form

The IRS 1120-S form is essential for S corporations, but it often comes with a set of accompanying documents that are vital for proper tax filing. Understanding these forms can help ensure compliance and accurate reporting. Here are some of the key forms and documents commonly used alongside the 1120-S.

Schedule K-1 (Form 1120-S): This form reports each shareholder's share of the corporation's income, deductions, and credits. It provides necessary information for individual shareholders to complete their personal tax returns.
Form 941: This is the Employer's Quarterly Federal Tax Return. It is used by S corporations to report wages paid to employees, including federal income tax withheld and Social Security and Medicare taxes.
Form W-2: Issued to employees, this form reports annual wages and the amount of taxes withheld from their paychecks. S corporations must provide these to their employees by the end of January each year.
Form 1099: Used to report various payments made to independent contractors or other non-employee service providers. It helps the IRS track income that isn’t subject to withholding.
Form 4562: This form is used to claim depreciation and amortization on business assets. S corporations need this to properly allocate and deduct the cost of property and equipment over time.
Form 1125-A: This document details the cost of goods sold for businesses that sell products. It is crucial for S corporations that have inventory or produce goods.
Form 1125-E: This form provides information on compensation of officers within the corporation, which is important for determining reasonable compensation for S corporation shareholders.

Filing the 1120-S form along with these supporting documents ensures that an S corporation remains compliant with federal tax laws. By keeping this information organized, businesses can facilitate smoother tax preparation and minimize the risk of errors or audits.

Similar forms

IRS Form 1120: This is the standard corporate tax return filed by C corporations. Unlike the 1120-S, which is designed for S corporations and passes income directly to shareholders, the 1120 form taxes the corporation itself at corporate tax rates.
IRS Form 1065: Used by partnerships to report income, deductions, gains, and losses. Like the 1120-S, partners report their share of income on their personal tax returns, emphasizing flow-through taxation.
IRS Form 1040: This is the individual tax return form. While it is not a business form, shareholders of an S corporation report their share of passes income on their 1040, similar to how partners do with the 1065.
IRS Form 990: Not-for-profits use this form to report financial information to the IRS. It is required for tax-exempt organizations, emphasizing transparency in operations and finances, similar to the S corporation’s disclosure of income to shareholders.
IRS Form 1120-W: This form is for corporations that need to make estimated tax payments. While it serves a different purpose, it's still a component of the corporate tax framework, similar in nature to how the 1120-S fits into the taxation of S corporations.

Dos and Don'ts

Filling out the IRS 1120-S form can be an important task for your S corporation. To ensure a smooth process and accurate submission, here’s a list of things you should and shouldn’t do:

Do: Gather all necessary documentation beforehand to save time.
Do: Double-check your calculations to avoid errors that could lead to delays.
Do: Ensure that you include all income sources to accurately report your earnings.
Do: Sign and date the form before submission; an unsigned form is not valid.
Do: File the form on time to avoid penalties and maintain good standing with the IRS.

Don't: Leave any fields blank; all required information must be filled out.
Don't: Ignore the instructions provided with the form, as they offer important guidelines.
Don't: Mix personal and business expenses; keep them separate for clarity.
Don't: Wait until the last minute to file; this can increase the chance of mistakes.
Don't: Forget to include any necessary supporting documents with the submission.

Misconceptions

The IRS 1120-S form, also known as the U.S. Income Tax Return for an S Corporation, is often surrounded by misconceptions. Here are some common misunderstandings about this important form:

All Corporations Must Use Form 1120-S: Not all companies are required to use this form. The 1120-S is specifically for S Corporations, while other types of corporations, like C Corporations, must use Form 1120.
S Corporations Pay Corporate Taxes: Many people mistakenly believe that S Corporations pay taxes at the corporate level. In fact, S Corporations typically pass their income, losses, and deductions directly to shareholders, who report it on their personal tax returns, thus avoiding double taxation.
You Cannot Change Your Mind: Once a corporation elects S Corporation status by filing Form 2553, some assume this choice is permanent. In reality, an S Corporation can revoke its status by following proper procedures, allowing for flexibility in management structure.
No Limits on Ownership: Some individuals think that anyone can own an S Corporation. However, S Corporations have specific restrictions—such as a limit of 100 shareholders and a requirement that all shareholders be U.S. citizens or residents.
All Income Is Taxable: There's a common belief that all income reported on Form 1120-S is taxable to the shareholders. However, income types vary, and some might have specific tax treatments that may affect the actual taxable amount.
Filing Form 1120-S Is Optional: While it’s true that S Corporations are not strictly required to file Form 1120-S if they have no income, failing to file can lead to penalties and complications, making it crucial for compliant organizations.
There’s No Need for Record Keeping: Some overlook the importance of keeping accurate records for an S Corporation. Good record-keeping is essential, as it supports the information reported on Form 1120-S and can protect the corporation in case of an audit.
Salaries for Shareholders Are Not Necessary: A misconception exists that shareholder-employees of an S Corporation do not need to take salaries. However, the IRS requires reasonable compensation for services performed, and failing to pay salaries can lead to penalties.

Understanding these misconceptions can help S Corporation owners navigate their tax obligations more effectively and avoid potential pitfalls. Always consult with a tax professional for personal advice tailored to specific circumstances.

Key takeaways

The IRS 1120-S form is essential for S corporations in the United States to report income, deductions, and credits. Below are key takeaways for understanding and utilizing this form.

Fill out the form accurately to reflect the corporation's financial activities for the tax year. This includes all income, allowable deductions, and applicable credits.
Make sure to maintain compliance with IRS guidelines to avoid potential penalties or delays in processing. This compliance includes keeping thorough records that support the income and deductions claimed.
Share the K-1 forms with shareholders after submitting the 1120-S. This informs shareholders of their share of the company's income, deductions, and credits, which they will need for their personal tax returns.
Understand the deadlines associated with the form. The 1120-S is generally due on March 15, following the end of the tax year, with extensions available under certain circumstances.