Form 1120-S

What Is Form 1120-S?

Form 1120-S is the required IRS tax return document businesses registered as S corporations (S corps) use to report any profits, losses, and deductions for the fiscal year.

Because S corps are pass-through tax entities—which means income “passes through” to the owners (referred to as "shareholders")—business income is reported on the shareholders’ personal income tax returns. In other words, S corps don’t pay corporate taxes. Instead, the income is taxed at the shareholders’ personal income tax rate.

Along with other IRS forms, this one is usually submitted with copies of Schedule K-1 (Form 1120-S) to specify what income, deductions, credits, and other items each shareholder owns.

Form 1120-S Due Date

The submission is due by the 15th day of the third month after the end of the fiscal year. In most cases, this will be March 15 of the following tax year. S corps can request a six-month extension on this due date using Form 7004, but it must be filed with the IRS by March 15.

Who Needs to File an IRS Form 1120-S?

All business owners who filed Form 2553 for their company and elected to be taxed as an S corporation must file an IRS Form 1120-S each year. The ownership percentages listed on the form let the IRS know how much of the company’s profits or losses should be allocated to any particular shareholder for tax purposes.

What Is IRS Form 1120-S Used For?

Form 1120-S is considered the business's tax return. This informational federal document reports flow-through financial actions like gains, deductions, and credits to the business’s owners.

S corporation shareholders use IRS Form 1120-S to report their share of the company’s annual distributions on their personal income return. Because profits and losses are “passed through” to the shareholders, the S corp does not generally pay federal taxes at the corporate level. In turn, this allows the business and everyone involved to reap any benefits that an S corp provides (such as direct transfers of ownership or the use of cash accounting) while remaining tax exempt.

Why Is Form 1120-S Important?

Form 1120-S is important because it keeps both S corporations and their shareholders in compliance with IRS taxation regulations. It clearly explains all business income in an easy-to-understand format for the IRS. It also highlights shareholder ownership, so it's clear how much of the business each person owns.

Additionally, it helps make tax payments and refunds quicker, easier, and less prone to errors and enables each shareholder to accurately complete their personal income tax returns.

Pass-through tax liability is the primary benefit of electing S corporation status. Ensuring Form 1120-S is correctly filled out and filed allows the business to avoid costly “failure to file” penalties of up to $450 per shareholder, which can eat into any monetary benefit gained from this tax status.

What Is the Difference Between IRS Forms 1120 and 1120-S?

IRS Forms 1120 and 1120-S are both used by corporations to file tax returns. The difference is that Form 1120 is used by C corporations (C corps), which are liable for corporate federal taxes, and Form 1120-S is used exclusively by S corps.

Who Is Eligible to Create an S Corp and File Form 1120-S?

It’s important to note that S corp shareholders must be US citizens or legal residents. An eligible S corp can be the following:

• An individual
• A trust
• An estate
• A certain tax-exempt organization

To qualify as an S corporation, you must also have no more than 100 shareholders.

Information Reported on Form 1120-S

Before getting into the details of S corp finances, Form 1120-S asks for some basic information:

• Corporation name
• Business mailing address
• Employer identification number (EIN)
• Business activity code
• Date of incorporation
• Total asset amount
• S corp election effective date (from Form 2553)

Because Form 1120-S is an income tax form, detailed financial data is required for each section, such as:

• Income (Lines 1–6): This section includes information like gross receipts and sales, the cost of goods sold, gross profit, net gain, and other income.
• Deductions (Lines 7–21): This section asks for information such as officer compensation, salaries and wages, repairs and maintenance, rent, bad debts, taxes, depreciation, advertising, pensions, benefit programs, and other deductions.
• Tax and Payments (Lines 22–27): This section requires information like excess net passive income, credit for federal tax paid on fuels, estimated tax penalties, and more.

The remainder of Form 1120-S includes five schedule forms:

• Schedule B: Other Information
• Schedule K: Shareholders’ Pro Rata Share Items
• Schedule L: Balance Sheets 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 Account

Additional Forms to File with an 1120-S Form

Though Schedule K-1 is not included in Form 1120-S, one copy must be completed for every shareholder. Since S corp taxes pass through to the shareholders, Schedule K-1 tells the IRS how much of the corporation’s profits, losses, credits, and deductions should be allotted to each individual or entity based on what percentage of the business they own. For example, a shareholder who owns 30% of the company should have a Schedule K-1 that reflects 30% of the company’s profits and losses.

The other IRS forms you may need to file with Form 1120-S include:

• Form 4797, Sales of Business Property
• Form 8949, Sales and Other Dispositions of Capital Assets
• Form 8996, Qualified Opportunity Fund
• Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation
• Form 1125-A, Cost of Goods Sold
• Form 8050, Direct Deposit of Corporate Tax Refund
• Form 4136, Credit for Federal Tax Paid on Fuels
• Form 8941, Credit for Small Employer Health Insurance Premiums
• Form 6252, Installment Sale Income
• Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments
• Form 8938, Statement of Specified Foreign Financial Assets
• Additional schedules required

How to File Form 1120-S

Form 1120-S and related schedules, statements, and attachments can be filed electronically using an authorized e-file provider. According to Form 1120-S instructions, Some S corps, such as those with assets totaling $10 million or more that file 250+ returns each year, are required to e-file.

In certain situations, the IRS may grant a waiver for the e-file requirement. However, software limitations are generally not an acceptable excuse for not e-filing. Eligible businesses can file a paper return by mail. Once you've gathered all the necessary materials, check the IRS website for information about where to mail Form 1120-S based on your corporation’s location.

Where to Mail Your 1120-S Form

S corps in Connecticut, Delaware, Washington D.C., Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, and Wisconsin with less than $10 million in total assets and no Schedule M-3 filed can send their tax return to:

Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999-0013

S corps in the aforementioned states with more than $10 million in assets or less than $10 million in assets and a Schedule M-3 filed send their materials to:

Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0013

S corps in all other states with total assets in any amount send their tax returns to:

Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0013

S corps in a foreign country or US possession send their tax returns to:

Internal Revenue Service
PO Box 409101
Ogden, UT 84409