An HR Glossary for HR Terms
Glossary of Human Resources Management and Employee Benefit Terms
What Is a Form 1120-S?
A form 1120-S is the tax return form for businesses registered as S corporations, a type of corporation that avoids double taxation at both the corporate and personal level. S corps use this tax form to report any profits, losses, and deductions for that fiscal year. Because S corps are pass-through tax entities––meaning the income “passes through” to the owners––the business income is reported on the shareholders’ personal income tax returns. This means S corps don’t pay corporate taxes; instead, income is taxed at the owners’ personal income tax rate.
To view a copy of the form, click here.
Why Is Form 1120-S Important?
Form 1120-S is important for S corps because, in addition to reporting income, it also tells the IRS what percentage of the company is owned by individual shareholders. This will determine any tax payments or refunds that are due to shareholders on their personal income tax returns. Passing tax liability on to a business’s owners is the main purpose for electing to be an S corp, so making sure that this information is accurately reported to the IRS ensures that the business actually secures this benefit.