Key takeaways
- S corporations, or s-corps, pass the profits and losses of the business directly to shareholders, who then report these amounts on their personal tax returns.
- S-corps generally aren't subject to corporate income tax though they still need to file a yearly tax return using Form 1120-S.
- Form 1120-S is the official income tax return for S corporations— it's what declares its income, losses, deductions, and credits for the tax year.
- S corporations must be domestic and can't have more than 100 shareholders.
Understanding Form 1120-S
Form 1120-S is the official income tax return for S corporations. These entities are unique in that they choose to pass their income, losses, deductions, and credits through to their shareholders for federal tax purposes. The election results in shareholders reporting the corporation's income and losses on their personal tax returns instead of the corporation paying taxes on its income.
Form 1120-S is the vehicle through which an S corporation declares its income, losses, deductions, and credits for the tax year. It's the instrument by which the corporation calculates its taxable income and tax liability, and makes any necessary estimated tax payments.
A corporation or other entity must file Form 1120-S if:
- It elected to be an S corporation by filing Form 2553
- The IRS accepted the election, and
- The election remains in effect.
What information is required on Form 1120-S?
Here's a comprehensive look at the details you need to include on Form 1120-S, from gross income to tax liability, and everything in between.
Gross income
S-corporations are required to disclose their gross income on Form 1120-S. This encompasses all revenue from business activities, including sales, interest, and rental income. Additionally, any other income, such as capital gains and dividends, must be reported.
Deductions and credits
S corporations are eligible to deduct specific expenses from their gross income to determine their taxable income. These deductions encompass typical business costs like salaries, rent, and utilities. Moreover, S corporations can also claim certain credits, such as the foreign tax credit and the research and development credit.
TurboTax Tip:
It's beneficial to take advantage of the deductions and credits available to S corporations when calculating taxable income. Regular business expenses such as salaries, rent, and utilities can all be deducted.
Shareholder information
S corporations are required to furnish shareholder details on Form 1120-S. This encompasses the names, addresses, and Social Security numbers of all shareholders, as well as the number of shares each individual possesses.
Taxable income
S corporations calculate their taxable income by subtracting deductions and credits from gross income. This taxable income is then passed through to shareholders, who report it on their individual tax returns.
Tax liability
S corporations are generally exempt from corporate-level income tax. Nevertheless, they are responsible for other taxes, including payroll and sales taxes. Additionally, S corporations are mandated to make estimated tax payments if they anticipate a tax bill exceeding $500 for the year.
How to file Form 1120-S
This section provides information on filing Form 1120-S, the U.S. income tax return for an S corporation. It discusses the filing options, due date, and the requirements for extensions.
How to file Form 1120-S
You have two options for filing Form 1120-S: electronically or by mail. The IRS recommends electronic filing because it is more accurate and efficient. There are a number of IRS-approved e-file providers that can assist you in filing Form 1120-S electronically.
If you opt for the traditional paper route, the mailing address for Form 1120-S is the Internal Revenue Service Center in Cincinnati, Ohio:
Internal Revenue Service Center
Cincinnati, OH 45999
Form 1120-S is due on the 15th day of the third month after the end of the corporation's tax year. For example, if the tax year ends on Dec. 31, the due date is March 15.
Need more time? You can request an extension for filing Form 1120-S. The IRS will automatically grant a six-month extension if you file Form 7004 by the due date of Form 1120-S. If you need a longer extension, you must demonstrate reasonable cause for the extension.
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