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Form 1120-S: The Tax Form for S Corporations
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Form 1120-S: The Tax Form for S Corporations
Starting a business is a dream for many. It takes a lot of courage to make it a reality. There’s an endless list of business decisions to make and a lot of things to keep track of. One important decision is the type of business entity best suited for your organization's goals and targets. You have the option to choose a corporation, LLC, sole proprietorship or partnership.
S corporations are a great option for small businesses or if you want to have 100 shareholders or less. Since every business entity has its own tax requirements, it might be difficult to keep track of everything. S Corp taxes are no different and the Internal Revenue Service (IRS) requires S Corps to file the 1120S tax form. We’ll cover everything tax-related for S Corps, so you’ll know how to file form 1120S when tax time rolls around.
Table of contents
What’s an S Corp?...Read more
What is a 1120S form?...Read more
Importance of Form 1120S...Read more
What are 1120S returns?...Read more
Who files Form 1120S?...Read more
Where to send 1120S form?...Read more
How to file form 1120S?...Read more
Form 1120S due date...Read more
1120 S form penalties...Read more
What’s an S Corp?
An S Corp is a type of corporation with the typical benefits of incorporation but has a different tax system, called a pass-through tax system. So income, losses, credits and deductions can pass through directly to the shareholders, all without paying corporate taxes.
C corporations are different from S corporations in that they face double taxation since they are also taxed at a corporate and individual level.
What is a 1120S form?
There’s no denying there are a lot of IRS tax forms. Since every business entity has its own set of tax rules and regulations, the tax forms are different. C Corps and multi-member LLCs file Form 1120.
But for S Corps, instead of filing Form 1120, you’ll file the 1120S form.
Importance of Form 1120S
1120-S is important for two reasons:
- It reports income
- It tells the IRS the percentage owned by each shareholder
What are 1120S returns?
When filing 1120S, you’ll need to include certain returns.
Who files Form 1120S?
You’ll need to file Form 1120S if your business is an S corporation or an LLC that has elected to be taxed as an S Corp. Shareholders report their earnings on their personal income tax return, not Form 1120S.
Where to send 1120S form?
You can download Form 1120S from the IRS website.
How to file form 1120S?
The first thing to do is gather all the necessary information for 1120-S. You’ll need to have certain information on hand including:
- Incorporation date
- S Corp start date
- Employer Identification Number (EIN)
- Business activity code
- Number of shareholders
- Details about assets, profits, losses & deductions
- Accounting method used
- Stocks owned by the business
On the first page, you’ll report basic information including deductions like salaries, advertising and interest.
The next page, Schedule B, asks a lot of questions related to the business. You might be able to skip some of the questions. You’ll need to mention the accounting method used and a description of your business service or product.
You’ll need to submit one Schedule-K per shareholder. On Schedule-K, you’ll report the shareholders deductions, credits and income.
Some corporations may be required to fill out Schedule L, which is a balance sheet. If you file Schedule L, you’ll also need to submit Schedule M-1. Schedule M-1 reconciles the business’s profits and losses from the accounting books with the tax return.
Schedule M-2 is another tax form that’s short but complex. It essentially tells you how much money you have leftover after the profit and losses, or your business’s balance.
S Corps don’t file other tax forms, like Form 1065, Form 940, Form 990 or any tax forms related to LLCs.
Form 1120S due date
S Corps must file 1120S tax form by the 15th day of the third month of the end of the tax year. Typically, this is March 15, unless this day falls during the weekend or on a public holiday. Plus, you’ll need to make sure you attach Schedule K-1 for each of the shareholders. If you need an extension, you’ll have to file Form 7004.
Typically, shareholders will pay taxes on their S Corp profits when individual tax returns are filed by the April 15 deadline.
1120 S form penalties
The penalties for S Corps are very steep, and landing a penalty could cost you a big chunk of money. The failure-to-file penalty for 1120S is $195 for each shareholder per month it’s late. Even if you file on time, you might get slapped with this penalty if you fail to file complete information on Form 1120S. That amount can add up pretty quickly if you have a lot of shareholders. So it’s best to file Form 1120S on time and save your hard-earned money.
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