Form 1120-S: How to File
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What Is Form 1120-S?
Form 1120-S is an Internal Revenue Service form that S Corporations use to report the company’s financial activity for each tax year. Some of the financial activity reported on this form include:
- Gains
- Losses
- Deductions
- Credits
Corporations only use this form if the company has already filed IRS Form 2553 and the IRS has approved S Corp election for the company.
S Corps are pass-through entities , so they do not pay federal income taxes directly. Instead, shareholders report the corporation’s profits on their personal income tax return.
Even though S Corps aren’t subjected to corporate taxes, Form 1120-S is still essential. The information on it must be consistent with the Schedule K-1 forms filed by individual shareholders, which report what percentage of the corporation is owned by each shareholder to the IRS.
The Schedule K-1 form allows the IRS to determine what taxes each business owner must pay or be refunded on their personal tax return. Without an accurate 1120-S and Schedule K-1, the S Corporation and shareholders may not receive certain tax benefits.
Click here to read more about Form 1120-S, access a PDF copy of the form, and read instructions about filling it out.
What is Form 1120-S Used For?
Form 1120-S is the S Corp’s tax return. Even though S-Corps do not pay federal income tax, their profits, losses, deductions, and credits still need to be reported to the IRS. The IRS will use the corporate tax return documents to determine how to tax each individual shareholder.
For more information about Form 1120-S and what it is used for, read this article.
Differences Between Form 1120 and 1120-S
Form 1120-S is filed by S Corps for federal taxes, while Form 1120 is filed by C Corps for taxes. S Corps and C Corps are both classified as corporations; however, they have several differences and offer different advantages and disadvantages to business owners.
C Corporations are not pass-through entities like S Corps. C Corps must fill out and File Form 1120 with the IRS and pay federal income tax at the corporate level.
Shareholders in a C Corp are required to pay personal income tax on both their salary from the corporation and dividends received from the corporation.
This tax structure is called “double taxation” because the C Corp is taxed first at the corporate level, then shareholders are taxed again as individuals. Double taxation is often seen as the most significant disadvantage for forming a C Corp rather than an S Corp.
Despite double taxation, C Corps do offer shareholders multiple advantages:
- C Corps can have an unlimited amount of shareholders
- Shareholders do not have to be US citizens or legal residents
- C Corps can have more than one class of stock
- There is a lower minimum tax rate for C Corps
- C Corps have an easier time securing outside financing
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How To Fill Out Form 1120-S
In most cases, S Corporations can electronically file their Form 1120-S with all related forms, schedules, statements, and attachments. Some of these attachments may include:
- Form 7004- Automatic extension of time to file
- Forms 940, 941, and 944- Employment tax returns
- Form 1099- Miscellaneous income
Form 1120-S is usually required to be filed by the 15 th day of the third month after the end of the tax year. Any corporation that uses the regular calendar year would need to file before March 15 th.
You will need the following information to fill out Form 1120-S accurately:
- The date of incorporation
- A list of products and services
- Business activity code
- EIN
- Date of elected S Corp status
- Profit and loss statement with a balance sheet
- Accounting method
- Any independent contract payments
For the IRS to accept Form 1120-S, it must be signed and dated by either the president or another corporate officer authorized to sign tax returns.
IRS Form 1120-S can be very complicated to fill out depending on the size of the corporation and the nature of the business. It is best to consult with a tax lawyer or licensed accountant before submitting tax documents to the IRS.
Changes that Affect Form 1120-S
Due to changing legislation and different circumstances that affect businesses in the United States, it is always important to check with the IRS website every year to see if any new laws affect how you file your taxes. You may be eligible for tax credits you didn’t even know about.
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S Corporations and Taxes
Once IRS Form 2553 is filed and approved by the IRS, a corporation is classified as an S Corp. S Corporations benefit from pass-through taxation much like an LLC or partnership. They are not required to pay federal income tax at the corporate level like C Corporations. This provides a variety of tax benefits to shareholders and makes S Corps a very desirable business entity.
Shareholders in an S Corp are required to report their percentage of the company’s financial activity on their individual federal income tax return. Each shareholder will then be taxed at their individual tax rate.
Self-Employment Tax
The one tax benefit that attracts many companies to elect S Corp status is that S Corp shareholders are not required to pay self-employment tax except for tax on any salary they earn from the company. Any shareholder who also does work for the company is considered both an owner and an employee. That individual is required to collect a reasonable salary for the work performed, and they will be taxed on that income. However, the shareholder is not required to pay self-employment taxes on dividends from the company. When divided correctly, the shareholder could save a lot of money on taxes.
As of 2018, qualifying Shareholders in an S Corp are also eligible to deduct up to 20% of their net business income from their income taxes. This reduces their effective income tax rate by 20%.
Form 1120-S Frequently Asked Questions
What is ordinary business income on Form 1120-S?
Ordinary business income or loss is the net income or loss for the company. Form 1120-S starts with the company’s total sales and revenues and then subtracts all the business-related expenses. This final number is called the ordinary business income.
How are S Corp distributions reported?
S Corp distributions are reported on for K-1, which is filed with the company’s 1120-S. Schedule K-1 will break down what percentage of the company each shareholder owns. This allows the IRS to determine how to tax each shareholder.
Do S Corp distributions count as income?
S Corp distributions do not count as income and are exempt from taxation. Distributions can include amounts taxed in a prior year, amounts taxed in the current year, and amounts that haven’t been taxed.
What do S Corps do with extra money?
S Corp owners can take money out of the company in various ways. These include wages, distributions, loans, and reimbursement for business expenses.
Can you leave money in an S Corp?
There are no tax implications with leaving money in an S Corp account. This is because S Corps are not taxed at the corporate level. Any money left in an S Corp becomes an asset of the company.
Get Help With Form 1120-S
Do you have questions about Form 1120-S and want to speak to an expert? Post a project today on ContractsCounsel and receive bids from tax lawyers who specialize in IRS tax forms like Form 1120-S.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
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Form 1120-S
California
Can you explain the requirements and implications of filing Form 1120-S for a small business?
I am a small business owner and I have recently formed an S corporation for my business. I understand that as an S corporation, I am required to file Form 1120-S with the IRS. However, I am unclear about the specific requirements and implications of this form. I would like to know what information needs to be reported on Form 1120-S, what the deadlines for filing are, and any potential consequences or benefits associated with filing this form. Additionally, I would appreciate any guidance on how to properly complete and submit Form 1120-S to ensure compliance with IRS regulations.
Dolan W.
Hello! My name is Dolan and thanks for posting this question. Let me break this down in parts for you: 1. Filing Form 1120-S for your S corporation is an essential part of staying in compliance with IRS regulations. This form is specifically designed for S corporations to report their income, deductions, and other financial details to the IRS. 2. When it comes to what you need to report, Form 1120-S will ask for details like the company's income, expenses, cost of goods sold, deductions, and credits. You'll also report the allocation of profits and losses to each shareholder based on their ownership percentage, which goes on a Schedule K-1. Each shareholder then uses the Schedule K-1 to report their share of the company's income or loss on their individual tax returns. 3. The deadline for filing Form 1120-S is usually March 15th of the year following the tax year you're reporting. 4. The benefits of filing Form 1120-S are clear when it comes to avoiding double taxation. With an S corp, you only pay taxes on the personal level, which can save you a lot compared to a C corporation, where income is taxed at both the corporate and personal levels. It also provides a clear record of the business's income and deductions, which can help you if you’re ever audited. 5. As for completing the form, make sure your books are in order, and gather all the financial details for the year. You’ll need things like income statements, expense records, and information about each shareholder's ownership percentage. If you have a bookkeeper, great. If not, go to a company like Wave Accounting. 6. The key to getting this right is accuracy. The IRS takes mistakes on Form 1120-S seriously, so double-check everything before submitting it. If you’re unsure about anything, getting professional advice upfront can save you a lot of trouble later. It sounds like a lot, but once you get the hang of it, filing Form 1120-S can be pretty straightforward. Thanks so much!
Corporate
Form 1120-S
California
Can a corporation elect to be treated as an S corporation after filing Form 1120-S?
I am the owner of a small corporation that has been filing taxes using Form 1120-S for several years, and I recently learned about the potential tax benefits of electing S corporation status. I am interested in exploring this option and would like to know if it is possible to retroactively elect S corporation status for previous tax years, or if it can only be done prospectively.
Dolan W.
Hello! Tha answer is yes. What you need to do is seek a late election using Form 2553. Your late S corp election must be filed within three years and 75 days after its proposed effective date. This means that you can do this retroactively. You can even start here with this video to figure out how - https://www.youtube.com/watch?v=xA81sVVtgp8 Best of luck!
Limited Liability Company
Form 1120-S
Arizona
Is Form 1120-S required for a single-member LLC electing to be taxed as an S corporation?
I recently formed a single-member LLC and have elected to be taxed as an S corporation. I understand that Form 1120-S is generally used by S corporations to report their income, deductions, and other tax information. However, since I am the sole owner of the LLC and it is treated as a disregarded entity for federal tax purposes, I am unsure if I need to file Form 1120-S or if I can simply report the income and expenses on my personal tax return using Schedule C. Can you clarify the filing requirements in this scenario?
Randy M.
If your single-member LLC’s S corporation election (Form 2553) is accepted and effective for the tax year, you don’t use Schedule C for that business. You file Form 1120-S for the entity, issue yourself a Schedule K-1 (Form 1120-S), and report the K-1 items on your Form 1040 (typically on Schedule E). If the election isn’t effective for the year in question (for example, it was filed late and not granted relief), you remain a disregarded entity for that year and would report on Schedule C instead. What this means for your filings this year File Form 1120-S by the 15th day of the third month after the end of your tax year (March 15 for a calendar-year S corp). Provide yourself a shareholder K-1. On your personal return, include K-1 income, deductions, and credits; don’t duplicate the same activity on Schedule C. Keep the IRS approval of your S election with your permanent records and verify the effective date before you prepare the return. Where Schedule C still applies (edge cases) If your 2553 wasn’t accepted or the effective date falls after the start of the year, the pre-election period is still disregarded-entity activity. In a mid-year effective-date situation, you’ll generally have two “periods”: a Schedule C period before the S election takes effect and an 1120-S period after. If your 2553 was late, consider Rev. Proc. 2013-30 relief so you can treat the election as timely and avoid an unintended Schedule C year. Payroll and “reasonable compensation” Once you’re taxed as an S corporation, you’re both owner and employee if you perform services. Pay yourself reasonable compensation through payroll and issue a W-2. That means registering for payroll, withholding and depositing employment taxes, filing Form 941 quarterly and Form 940 annually (where applicable), and following Publication 15 for rates and deposit rules. Non-wage distributions can be taken in addition to wages, but they come after paying reasonable compensation. Practical example Assume your 2553 was accepted effective January 1, 2025. For 2025 you run payroll to pay yourself reasonable wages, file 1120-S by March 17, 2026 (March 15, 2026 is a Sunday), and issue yourself a K-1. On your 2025 Form 1040 you include W-2 wages from your S corp and the Schedule E entry from your K-1. You do not file a Schedule C for that LLC. If the IRS letter shows an effective date of July 1, 2025, you’d generally report Jan–Jun activity on Schedule C and Jul–Dec on 1120-S unless you secure late-election relief aligning the election to January 1. State and local considerations Many states require separate S-corporation or franchise filings, estimated payments, or annual fees even if there’s no entity-level income tax. Check your state’s S-corp conformity, filing thresholds, and due dates. For payroll, also register with your state workforce and revenue agencies and follow state deposit and return schedules. Common pitfalls to avoid Don’t file 1120-S unless your S election is actually in effect; the IRS typically sends Notice CP261 confirming acceptance. Don’t skip payroll or set wages unreasonably low relative to your role. Don’t double-report the same activity on both Schedule C and your K-1. Finally, don’t overlook shareholder basis tracking; it affects loss deductibility and the taxability of distributions. Records and elections to keep on file Retain your filed Form 2553 and acceptance notice, EIN assignment letter, payroll registrations, quarterly and annual payroll returns, shareholder basis schedules, minutes/consents approving compensation, and any correspondence related to late-election relief. The Final Analysis Once your single-member LLC elects S corporation status, Form 1120-S becomes mandatory and Schedule C is no longer an option. Stay on top of payroll, compensation, and recordkeeping, and you’ll be in compliance. If you’re unsure about the details, a CPA experienced with small S corps can keep you on track and help you capture the full tax benefits.
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