What Is Form 1120-S: U.S. Income Tax Return for an S Corporation?
Form 1120-S: U.S. Income Tax Return for an S Corporation is a tax document that is used to report income, gains, losses, credits, deductions, and other information pertaining to businesses that are registered as S corporations to the Internal Revenue Service (IRS). Put simply, Form 1120-S is considered the tax return of an S corporation. The form must be filed by the 15th day of the 3rd month after the corporation's tax year.
Key Takeaways
- Form 1120-S is the annual tax return for businesses that are registered as S corporations.
- The form is used to report income, gains, losses, credits, deductions, and other information for S corporations.
- Form 1120-S must be accompanied by Schedule K-1, which lists individual shareholders and the amount of profit and loss allotted to each.
- The company's information must be included on Form 1120-S along with details about its income, deductions, taxes, and payments.
- Form 1120-S can be filed electronically or by mail.
Who Needs to File IRS Tax Form 1120-S?
A corporation must file Form 1120-S if it elected to be an S corporation by filing Form 2553: Election by a Small Business Corporation, and the IRS accepted the election.
An S corporation is a business entity permitted under the U.S. tax code. It is meant for smaller companies with fewer than 100 shareholders. S corporations are considered pass-through entities as they don't pay corporate taxes. Instead, they pass the tax liabilities to their individual shareholders.
The IRS uses the ownership percentage detailed in Form 1120-S to allocate how much profit and loss is assigned to an individual shareholder.
A shareholder's profit and loss are relatively easy to calculate if they don't see a change in the percentage of the shares they hold during the year. But if the shareholder purchases, sells, or transfers any (additional) shares or holdings during the course of the year, then their profit and loss must be prorated on a per-share basis.
The business structure of an S corporation allows it to pass corporate income, losses, deductions, and credits through to shareholders for federal tax purposes. It avoids double taxation as individual shareholders are taxed rather than the corporation.
Information Included on Form 1120-S
As noted above, S corporations use Form 1120-S to report the income, gains, losses, credits, and deductions, along with other information to the IRS each year.
The form includes pertinent business details, including:
- Corporation name
- Mailing address
- Employer identification number (EIN)
- Date of incorporation
- Total assets
- The effective date of the S corporation election
- Business activity code
The remainder of the form includes other key information, which is noted in the table below.
| Sections on Form 1120-S: U.S. Income Tax Return for an S Corporation | |
|---|---|
| Section | What's Included |
| Income | Receipts, sales, returns, allowances, gross profit, other income, etc. |
| Deductions | Compensation, salaries, wages, repairs, bad debts, rents, taxes, depreciation, advertising, pensions, etc. |
| Tax and Payments | Excess net passive income, estimated tax penalty, etc. |
There are also a number of different schedules that are part of Form 1120-S. These include:
- Schedule B: Other Information
- Schedule K: Shareholders’ Pro Rata Share Items
- Schedule L: Balance Sheet per Books
- Schedule M-1: Reconciliation of Income (Loss) per Books with Income (Loss) per Return
- Schedule M-2: Analysis of Accumulated Adjustments Account, Shareholders' Undistributed Taxable Income Previously Taxed, Accumulated Earnings and Profits, and Other Adjustments
Form 1120-S must be accompanied by Schedule K-1. This schedule must be prepared for every shareholder. Schedule K-1 identifies each individual shareholder of the S corporation and reports the portion of income, profits, losses, credits, and deductions allotted to each shareholder. The information from Schedule K-1 is also included on each shareholder's individual tax return.
How to File Form 1120-S
Form 1120-S can be filed electronically each year. Small business owners may complete these forms on their own using special tax software. The majority of these programs do come at a cost but may be inexpensive compared to the use of a professional.
Some S corporations, especially those with more complicated tax situations, may choose to have their annual tax returns completed by a professional, such as a tax preparer or an accountant. Having a tax professional complete and submit these forms reduces (or eliminates) the likelihood of error.
Although the IRS continues to accept paper returns by mail, it strongly recommends filing tax returns electronically. Submitting paper returns by mail can result in delays.
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All pages of Form 1120-S can be downloaded from the IRS website.
What Is the Purpose of Form 1120-S?
Form 1120-S is the tax return for S corporations. As such, it is used by S corporations to report their income, profits, losses, tax credits, deductions, and other information to the IRS. The form can be filed electronically or by mail and must be accompanied by Schedule K-1. This schedule identifies individual shareholders in the S corporation along with the portion of income, profit, loss, tax credits, and deductions that are allocated to each of them.
Who Files Form 1120-S?
Form 1120-S is filed by S corporations. The form must be filed only after the IRS accepts the election of an S corporation filed by a business with fewer than 100 shareholders. The form may be prepared by a member of the corporation or a tax professional and must be filed electronically or by mail.
When Is Form 1120-S Due?
Form 1120-S is the annual tax return for S corporations. It must be filed with the IRS by the 15th of the third month following the end of the corporation's tax year. So if a company's tax year runs from Jan. 1 to Dec. 31, the company's tax return is due on March 15. On the other hand, a company whose tax year runs between July 1 and June 30 must complete and file Form 1120-S by Sept. 15.
The Bottom Line
Every entity must report its tax liabilities by filing a tax return each year with the IRS. This includes individuals and businesses of all sizes. Form 1120-S is the return that is dedicated to S corporations. These businesses have fewer than 100 shareholders and pass their income and losses to each shareholder. Companies can file these forms electronically or by mail and must include Schedule K-1 with their returns. All paperwork must be submitted to the IRS by the 15th of the third month after the end of the corporation's tax year.
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Internal Revenue Service. "Instructions for Form 1120-S (2022)."
Internal Revenue Service. "About Form 2553, Election by a Small Business Corporation."
Internal Revenue Service. "S Corporations."
Internal Revenue Service. "About Form 1120-S, U.S. Income Tax Return for an S Corporation."
Internal Revenue Service. "Form 1120-S," Page 1.
Internal Revenue Service. "Form 1120-S," Pages 2-5.
Internal Revenue Service. "About Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, Deductions, Credits, Etc."
Internal Revenue Service. "IRS Kicks Off 2023 Tax Filing Season with Returns Due April 18."
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