Form 1120 S

What is Form 1120-S?

Form 1120-S is an Internal Revenue Service (IRS) tax form used to report the income, losses, and dividends of S corporation shareholders. S corporations don't pay federal income taxes. Instead, the corporation's income, losses, deductions, and credits flow through to shareholders who report these amounts on their individual tax returns. Form 1120-S serves as the official record of this flow-through data.

Why is Form 1120-S Important?

Unlike regular corporations (C corporations) that face double taxation on corporate profits and dividends paid to shareholders, S corporations have a unique tax structure allowing them to avoid double taxation. This form helps ensure transparency by reporting all financial activities to the IRS, providing a clear track record for shareholders' individual tax reporting.

Who Should File Form 1120-S?

All S corporations are required to file Form 1120-S, irrespective of their level of income or activity. This is true even if the corporation didn’t earn any income or incur any expenses during the fiscal year.

When is the Deadline for Filing Form 1120-S?

Typically, the deadline for filing Form 1120-S is the 15th day of the third month following the end of the corporation’s tax year. For most corporations operating on a calendar year, this deadline is March 15.

What are the Main Parts of Form 1120-S?

Form 1120-S is comprehensive, consisting of several parts:

• Income: This section requires details about gross receipts or sales, returns and allowances, cost of goods sold, and other income.
• Deductions: Here, the corporation details various costs like salaries, rents, taxes, interest, depreciation, and other deductions.
• Tax and Payments: This section deals with figuring out the tax on certain built-in gains and excess net passive income.
• Schedule B: Contains questions about the S corporation’s practices throughout the year.
• Schedule K: Summarizes the total income, deductions, and credits of the corporation.
• Schedule K-1: Provides a breakdown of each shareholder’s share of the income, deductions, and credits.

What If an S Corporation Doesn't File Form 1120-S?

If an S corporation fails to file Form 1120-S by the deadline (including extensions), the IRS may impose a penalty for each month the form is late. This penalty is calculated based on the number of shareholders and can accumulate rapidly.

Can I Request an Extension for Filing Form 1120-S?

Yes, if an S corporation needs more time, it can request a six-month extension using Form 7004. This doesn't extend the time to pay taxes; it only grants additional time to file the form.

How Do I Correct Errors on Form 1120-S After Submission?

Mistakes happen, and the IRS provides Form 1120-S (Schedule K-1) to correct errors. It's crucial to address inaccuracies promptly to avoid complications or potential penalties.

Are There Specific State Requirements Related to Form 1120-S?

While Form 1120-S is a federal tax form, many states have their own version of this form for state tax purposes. It's essential for S corporations to check their state's tax requirements to ensure full compliance.