The Form 1120-S, also known as the U.S. Income Tax Return for an S Corporation, is a document used by S corporations to report their annual income, deductions, and tax liabilities to the Internal Revenue Service (IRS). This form requires detailed financial information and is pivotal for corporations that have elected the S status, ensuring compliance with federal tax obligations. For those preparing to navigate through the complexities of this tax form, clicking the button below will guide you through the process of accurately filling out the Form 1120-S.
The Federal Form 1120-S, known as the U.S. Income Tax Return for an S Corporation, serves as the cornerstone for S corporations in the United States to report their yearly income, deductions, and tax payments to the Internal Revenue Service (IRS). Businesses that have elected the S corporation status through Form 2553 must navigate the complexities of Form 1120-S, which requires detailed financial information including gross receipts, cost of goods sold, deductions for business expenses, and the allocation of income (or loss) to shareholders. Alongside core financial reporting, the form delves into specifics such as the corporation’s assets, shareholder particulars, accounting methods, and potential tax adjustments. It incorporates schedules for reconciling book income with taxable income, detailing the business’s asset and liability breakdown at the start and end of the tax year, and identifying any international transactions that may affect taxation. The form ensures that S corporations meet their reporting obligations while adhering to the tax code's stipulations for pass-through taxation, avoiding the double taxation characteristic of traditional corporations. Understanding and properly completing Form 1120-S is essential for S corporations to comply with U.S. tax laws, optimize their tax handling, and maintain their favorable tax status.
Form 1120-S
U.S. Income Tax Return for an S Corporation
OMB No. 1545-0123
▶ Do not file this form unless the corporation has filed or
2021
Department of the Treasury
is attaching Form 2553 to elect to be an S corporation.
Internal Revenue Service
▶ Go to www.irs.gov/Form1120S for instructions and the latest information.
For calendar year 2021 or tax year beginning
, 2021, ending
, 20
A S election effective date
Name
D Employer identification number
TYPE
B
Business activity code
Number, street, and room or suite no. If a P.O. box, see instructions.
E Date incorporated
OR
number (see instructions)
PRINT
City or town, state or province, country, and ZIP or foreign postal code
F Total assets (see instructions)
C Check if Sch. M-3 attached
$
G Is the corporation electing to be an S corporation beginning with this tax year? See instructions.
Yes
No
H
Check if: (1) Final return
(2) Name change (3) Address change
(4) Amended return (5)
S election termination
I
Enter the number of shareholders who were shareholders during any part of the tax year
. . . ▶
J
Check if corporation: (1)
Aggregated activities for section 465 at-risk purposes
(2) Grouped activities for section 469 passive activity purposes
Caution: Include only trade or business income and expenses on lines 1a through 21. See the instructions for more information.
Tax and Payments Deductions (see instructions for limitations) Income
1a
Gross receipts or sales
b
Returns and allowances
1b
c
Balance. Subtract line 1b from line 1a
. . . . . . . .
1c
2
Cost of goods sold (attach Form 1125-A)
3
Gross profit. Subtract line 2 from line 1c
4
Net gain (loss) from Form 4797, line 17 (attach Form 4797)
5
Other income (loss) (see instructions—attach statement)
6
Total income (loss). Add lines 3 through 5
. . . .
.
. .
▶
7
Compensation of officers (see instructions—attach Form 1125-E) . . .
8
Salaries and wages (less employment credits)
9
Repairs and maintenance
10
Bad debts
11
Rents
12
Taxes and licenses
13
Interest (see instructions)
14
Depreciation not claimed on Form 1125-A or elsewhere on return (attach Form 4562)
15
Depletion (Do not deduct oil and gas depletion.)
16
Advertising
17
Pension, profit-sharing, etc., plans
18
Employee benefit programs
19
Other deductions (attach statement)
20
Total deductions. Add lines 7 through 19
21
Ordinary business income (loss). Subtract line 20 from line 6 . . . .
22a
Excess net passive income or LIFO recapture tax (see instructions) . . .
Tax from Schedule D (Form 1120-S)
22b
Add lines 22a and 22b (see instructions for additional taxes)
22c
23a
2021 estimated tax payments and 2020 overpayment credited to 2021 .
Tax deposited with Form 7004
23b
Credit for federal tax paid on fuels (attach Form 4136)
23c
d
Add lines 23a through 23c
23d
24
Estimated tax penalty (see instructions). Check if Form 2220 is attached .
. ▶
25
Amount owed. If line 23d is smaller than the total of lines 22c and 24, enter amount owed . . .
26
Overpayment. If line 23d is larger than the total of lines 22c and 24, enter amount overpaid . . .
27
Enter amount from line 26: Credited to 2022 estimated tax ▶
Refunded ▶
Sign Here
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.
▲
May the IRS discuss this return
with the preparer shown below?
Signature of officer
Date
Title
See instructions.
Paid
Print/Type preparer’s name
Preparer’s signature
Check
if
PTIN
Preparer
self-employed
Firm’s name ▶
Firm’s EIN ▶
Use Only
Firm’s address ▶
Phone no.
For Paperwork Reduction Act Notice, see separate instructions.
Cat. No. 11510H
Form 1120-S (2021)
Page 2
Schedule B
Other Information (see instructions)
1 Check accounting method: a
Cash
Accrual
c Other (specify) ▶
2 See the instructions and enter the:
a Business activity ▶
b Product or service ▶
3At any time during the tax year, was any shareholder of the corporation a disregarded entity, a trust, an estate, or a nominee or similar person? If “Yes,” attach Schedule B-1, Information on Certain Shareholders of an S Corporation . .
4At the end of the tax year, did the corporation:
aOwn directly 20% or more, or own, directly or indirectly, 50% or more of the total stock issued and outstanding of any foreign or domestic corporation? For rules of constructive ownership, see instructions. If “Yes,” complete (i) through (v)
below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yes No
(i)Name of Corporation
(ii)Employer Identification
Number (if any)
(iii)Country of Incorporation
(iv)Percentage of Stock Owned
(v)If Percentage in (iv) Is 100%, Enter the Date (if applicable) a Qualified Subchapter
S Subsidiary Election Was Made
bOwn directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in the profit, loss, or capital in any foreign or domestic partnership (including an entity treated as a partnership) or in the beneficial interest of a trust? For rules of constructive ownership, see instructions. If “Yes,” complete (i) through (v) below . . . . . . .
(i)Name of Entity
(iii)Type of Entity
(iv)Country of Organization
(v)Maximum Percentage Owned in Profit, Loss, or Capital
5a At the end of the tax year, did the corporation have any outstanding shares of restricted stock? . . . . . . . .
If “Yes,” complete lines (i) and (ii) below.
(i)
Total shares of restricted stock
(ii)
Total shares of non-restricted stock
bAt the end of the tax year, did the corporation have any outstanding stock options, warrants, or similar instruments? . If “Yes,” complete lines (i) and (ii) below.
Total shares of stock outstanding at the end of the tax year
(ii)Total shares of stock outstanding if all instruments were executed ▶
6Has this corporation filed, or is it required to file, Form 8918, Material Advisor Disclosure Statement, to provide
information on any reportable transaction?
. . . . . . . . . . . . . . . . . . . . . . . .
Check this box if the corporation issued publicly offered debt instruments with original issue discount . . . . ▶
If checked, the corporation may have to file Form 8281, Information Return for Publicly Offered Original Issue Discount
Instruments.
8If the corporation (a) was a C corporation before it elected to be an S corporation or the corporation acquired an asset with a basis determined by reference to the basis of the asset (or the basis of any other property) in the hands of a C corporation, and
(b) has net unrealized built-in gain in excess of the net recognized built-in gain from prior years, enter the net unrealized built-in
gain reduced by net recognized built-in gain from prior years. See instructions . . . . . . ▶ $
9Did the corporation have an election under section 163(j) for any real property trade or business or any farming business
in effect during the tax year? See instructions . . . . . . . . . . . . . . . . . . . . . . . .
10 Does the corporation satisfy one or more of the following? See instructions . . . . . . . . . . . . . .
aThe corporation owns a pass-through entity with current, or prior year carryover, excess business interest expense.
bThe corporation’s aggregate average annual gross receipts (determined under section 448(c)) for the 3 tax years preceding the current tax year are more than $26 million and the corporation has business interest expense.
cThe corporation is a tax shelter and the corporation has business interest expense.
If “Yes,” complete and attach Form 8990.
11 Does the corporation satisfy both of the following conditions? . . . . . . . . . . . . . . . . . .
aThe corporation’s total receipts (see instructions) for the tax year were less than $250,000.
bThe corporation’s total assets at the end of the tax year were less than $250,000. If “Yes,” the corporation is not required to complete Schedules L and M-1.
Page 3
Other Information (see instructions) (continued)
12During the tax year, did the corporation have any non-shareholder debt that was canceled, was forgiven, or had the
terms modified so as to reduce the principal amount of the debt? . . . . . . . . . . . . . . . . .
If “Yes,” enter the amount of principal reduction . . . . . . . . . . . . . . ▶ $
13During the tax year, was a qualified subchapter S subsidiary election terminated or revoked? If “Yes,” see instructions .
14a Did the corporation make any payments in 2021 that would require it to file Form(s) 1099?
If “Yes,” did the corporation file or will it file required Form(s) 1099?
Is the corporation attaching Form 8996 to certify as a Qualified Opportunity Fund?
If “Yes,” enter the amount from Form 8996, line 15
. . . . ▶ $
Schedule K
Shareholders’ Pro Rata Share Items
Total amount
1
Ordinary business income (loss) (page 1, line 21)
. . . . . .
Net rental real estate income (loss) (attach Form 8825)
3a
Other gross rental income (loss)
Expenses from other rental activities (attach statement)
3b
Other net rental income (loss). Subtract line 3b from line 3a . . .
3c
(Loss)
Interest income
Dividends: a Ordinary dividends
5a
Income
b Qualified dividends
5b
Royalties
Net short-term capital gain (loss) (attach Schedule D (Form 1120-S))
8a
Net long-term capital gain (loss) (attach Schedule D (Form 1120-S)) .
Collectibles (28%) gain (loss)
8b
Unrecaptured section 1250 gain (attach statement)
8c
Net section 1231 gain (loss) (attach Form 4797)
Other income (loss) (see instructions) . . .
Type ▶
Deductions
Section 179 deduction (attach Form 4562)
12a
Charitable contributions
Investment interest expense
12b
Section 59(e)(2) expenditures
12c
Other deductions (see instructions) . . . .
12d
13a
Low-income housing credit (section 42(j)(5))
Low-income housing credit (other)
13b
Credits
Qualified rehabilitation expenditures (rental real estate) (attach Form 3468, if applicable)
13c
Other rental real estate credits (see instructions)
13d
e
Other rental credits (see instructions) . . .
13e
f
Biofuel producer credit (attach Form 6478)
13f
g
Other credits (see instructions)
13g
International Transactions
Attach Schedule K-2 (Form 1120-S), Shareholders’ Pro Rata Share Items—International, and
check this box to indicate you are reporting items of international tax relevance . . .
Alternative MinimumTax Items(AMT)
15a
Post-1986 depreciation adjustment
Adjusted gain or loss
15b
Depletion (other than oil and gas)
15c
Oil, gas, and geothermal properties—gross income
15d
Oil, gas, and geothermal properties—deductions
15e
Other AMT items (attach statement)
15f
ItemsAffecting ShareholderBasis
16a
Tax-exempt interest income
Foreign taxes paid or accrued
16f
Other tax-exempt income
16b
Nondeductible expenses
16c
Distributions (attach statement if required) (see instructions) . . .
16d
Repayment of loans from shareholders
16e
Page 4
Shareholders’ Pro Rata Share Items (continued)
Information
17a
Investment income
Other
Other items and amounts (attach statement)
Investment expenses
17b
Dividend distributions paid from accumulated earnings and profits
17c
Recon-
ciliation
Income (loss) reconciliation. Combine the amounts on lines 1 through 10 in the far right
column. From the result, subtract the sum of the amounts on lines 11 through 12d and 16f .
Schedule L
Balance Sheets per Books
Beginning of tax year
End of tax year
Assets
(a)
(b)
(c)
(d)
2a
Trade notes and accounts receivable . . .
Less allowance for bad debts
(
)
Inventories
U.S. government obligations
Tax-exempt securities (see instructions) . .
Other current assets (attach statement) . . .
Loans to shareholders
Mortgage and real estate loans
Other investments (attach statement) . . .
10a
Buildings and other depreciable assets . . .
Less accumulated depreciation
11a
Depletable assets
Less accumulated depletion
Land (net of any amortization)
Intangible assets (amortizable only) . . . .
Less accumulated amortization
Other assets (attach statement)
Total assets
Liabilities and Shareholders’ Equity
Accounts payable
Mortgages, notes, bonds payable in less than 1 year
Other current liabilities (attach statement) . .
Loans from shareholders
Mortgages, notes, bonds payable in 1 year or more
Other liabilities (attach statement) . . . .
22
Capital stock
23
Additional paid-in capital
Retained earnings
Adjustments to shareholders’ equity (attach statement)
Less cost of treasury stock
Total liabilities and shareholders’ equity . .
Page 5
Schedule M-1
Reconciliation of Income (Loss) per Books With Income (Loss) per Return
Note: The corporation may be required to file Schedule M-3. See instructions.
Net income (loss) per books . . . .
Income recorded on books this year
Income included on Schedule K, lines 1, 2,
not included on Schedule K, lines 1
through 10 (itemize):
3c, 4, 5a, 6, 7, 8a, 9, and 10, not recorded
on books this year (itemize)
a
Tax-exempt interest $
Expenses recorded on books this year
Deductions included on Schedule K,
lines 1 through 12 and 16f, not charged
through 12 and 16f (itemize):
against book income this year (itemize):
Depreciation $
Travel and entertainment $
Add lines 5 and 6
8 Income (loss) (Schedule K, line 18).
Add lines 1 through 3
Subtract line 7 from line 4 . . . .
Schedule M-2
Analysis of Accumulated Adjustments Account, Shareholders’ Undistributed Taxable Income
Previously Taxed, Accumulated Earnings and Profits, and Other Adjustments Account
(see instructions)
(a) Accumulated
(b) Shareholders’
(c) Accumulated
(d) Other adjustments
adjustments account
undistributed taxable
earnings and profits
account
income previously taxed
Balance at beginning of tax year
Ordinary income from page 1, line 21 . . .
Other additions
Loss from page 1, line 21
Other reductions
Combine lines 1 through 5
Distributions
Balance at end of tax year. Subtract line 7 from
line 6
Filing the Federal Supporting Form 1120-S is essential for S corporations to report their income, deductions, and credits to the IRS. Once completed, this form helps determine the tax liability of an S corporation, or if any refunds are due. It's crucial to pay close attention to detail when filling out this form to ensure accuracy and compliance with IRS regulations. Below are the steps to fill out Form 1120-S correctly.
After completing and signing Form 1120-S, it should be filed with the IRS by the prescribed deadline, typically by the 15th day of the 3rd month after the end of the corporation's tax year. If any payments are due, they should be submitted alongside the form to avoid penalties. Timely and accurate filing ensures compliance with IRS rules and helps avoid unnecessary audits or inquiries.
What is Form 1120-S?
Form 1120-S is used by S corporations to report their annual income, deductions, and credits to the Internal Revenue Service (IRS). An S corporation is a type of corporation that meets specific Internal Revenue Code requirements and elects to be taxed as a pass-through entity, meaning income, deductions, and credits flow through to shareholders.
Who needs to file Form 1120-S?
Any corporation that has elected to be treated as an S corporation for tax purposes must file Form 1120-S every year, regardless of its revenue or activity level during the tax year.
When is the deadline to file Form 1120-S?
The deadline for filing Form 1120-S is the 15th day of the 3rd month following the end of the corporation's tax year. For most corporations operating on a calendar year, the deadline is March 15th of the following year.
Is Form 2553 (Election by a Small Business Corporation) related to Form 1120-S?
Yes, Form 2553 is the form a corporation must file with the IRS to elect the S corporation status. This form must be filed before the corporation can file Form 1120-S. The election must generally be made by the 15th day of the third month of the tax year the election is to take effect.
What happens if an S corporation fails to file Form 1120-S on time?
If an S corporation doesn't file Form 1120-S by the due date (including extensions), it may face penalties. The penalty is based on the number of shareholders and the length of the delay in filing. The corporation may also face additional penalties for failing to provide its shareholders with their individual Schedule K-1s in a timely manner.
Can Form 1120-S be filed electronically?
Yes, Form 1120-S can be e-filed, and the IRS encourages electronic filing because it is faster and reduces errors. Electronic filing options are available through various tax preparation software and tax professionals.
What is Schedule K-1 and how is it related to Form 1120-S?
Schedule K-1, part of Form 1120-S, is used to report each shareholder’s share of the corporation’s income, deductions, credits, etc. Each shareholder receives a Schedule K-1 that must be reported on their individual tax returns. It's how the IRS ensures the pass-through taxation of the S corporation.
Are there any other forms that need to be filed with Form 1120-S?
Depending on the activities and financial transactions of the S corporation, additional forms and schedules may be required. For example, Schedule L (Balance Sheets per Books) is necessary if the corporation's total receipts or total assets at the end of the year are $250,000 or more. Form 1125-E (Compensation of Officers) and other forms could also be required based on specific circumstances.
What is the purpose of the Schedule M-2 on Form 1120-S?
Schedule M-2 reports the adjustments to the shareholders' equity accounts that are not reflected in the ordinary income or loss of the corporation. It tracks changes in the accumulated adjustments account, shareholders' undistributed taxable income previously taxed, accumulated earnings and profits, and other adjustments account.
If an S corporation has no income, does it still need to file Form 1120-S?
Yes, even if an S corporation has no income, it is still required to file Form 1120-S. The form is necessary to report the corporation’s financial activities for the year and to show the allocation of any deductions and credits to its shareholders.
One common mistake people make on the Form 1120-S, U.S. Income Tax Return for an S Corporation, involves neglecting to confirm the S corporation status by not attaching Form 2553 or failing to check the box in Section G if the corporation is electing to be an S corporation beginning with this tax year. Without clearly indicating the election or attachment of Form 2553, the IRS may not recognize the entity as an S corporation, potentially leading to an incorrect processing of the tax return and the imposition of default C corporation tax rates and regulations.
Another frequent error occurs in the Income and Deductions section, where individuals mistakenly report non-business income. The instructions specifically caution to include only trade or business income and expenses in lines 1a through 21. Misreporting income by including non-eligible income types could result in a skewed portrayal of the business’s financial situation, leading to possible audits or assessments of additional taxes and penalties for inaccurate reporting.
Additionally, incorrect asset reporting in Section F can also lead to issues. This section requires the corporation to report its total assets at the end of the tax year. An inaccurate representation of assets, whether overestimated or underestimated, can significantly affect tax liability and potentially result in penalties for misreporting. It’s crucial for corporations to meticulously evaluate and accurately report their assets to avoid any complications with the IRS.
Lastly, the Shareholders’ Pro Rata Share Items part, specifically designed for reporting each shareholder's share of income, deductions, and credits, often sees errors. The complexity of allocations can lead to inaccuracies if not carefully calculated and reported. Misallocations can not only affect the company's tax return but also impact the individual tax returns of the shareholders, leading to a domino effect of tax reporting errors that can be challenging to correct. Ensuring accuracy in this section is vital for both the corporation and its shareholders to maintain compliance with tax laws and to avoid possible audits or penalties for incorrect reporting.
When preparing the Form 1120-S U.S. Income Tax Return for an S Corporation, several additional forms and documents are often required or beneficial to support and complete the filing process efficiently. These documents can provide detailed information, which complements the primary tax return, ensuring compliance with IRS regulations and accuracy in reporting.
Completing and submitting these forms, when applicable, alongside Form 1120-S can ensure a smoother process for fulfilling tax reporting obligations. It's essential for S corporations to assess their activities throughout the year and determine which of these additional documents are necessary to accompany their tax return. Failure to include required information might result in processing delays or penalties, emphasizing the need for meticulous tax preparation.
Form 1120 U.S. Corporation Income Tax Return is closely related to the Federal Supporting Form 1120-S for S Corporations. Both are used by corporations to report income, gains, losses, deductions, and credits to the IRS. However, whereas Form 1120-S is specifically for S Corporations, which pass their corporate income, losses, deductions, and credits through to their shareholders, Form 1120 is for C Corporations, which are taxed separately from their owners.
Form 1065 U.S. Return of Partnership Income shares similarities with the Federal Supporting Form 1120-S, as both are used by entities that pass income to their owners or shareholders. Form 1065 is used by partnerships to report the income, deductions, gains, losses, etc., of the partnership. Like the S Corporation form, it allows the income to be taxed at the individual level rather than at the entity level, avoiding the double taxation faced by C Corporations.
Form 1040 U.S. Individual Income Tax Return is another document related to Form 1120-S. While Form 1120-S is used by S corporations, much of the income reported on it eventually flows through to individual tax returns on Schedule E (Form 1040), where shareholders report their share of the corporation's income or loss. This linkage makes individual returns a critical component of the taxation process for shareholders of S corporations.
Form 2553 Election by a Small Business Corporation is directly associated with the Federal Supporting Form 1120-S. A corporation or other eligible entity uses Form 2553 to elect to be treated as an S corporation. This election changes how the entity is taxed, moving from the corporate tax structure to a pass-through taxation model, which is reported on Form 1120-S.
Form 1125-E Compensation of Officers is often submitted alongside Form 1120-S in cases where the corporation needs to report the compensation of its officers. This form provides a detailed account of officers' remuneration, which is vital information for the IRS as it reviews the income and distributions of S corporations. It ensures transparency and compliance with compensation reporting requirements.
Form 4562 Depreciation and Amortization is used by corporations, including S corporations filing Form 1120-S, to report depreciation and amortization. Assets' depreciation is a critical component of an S Corporation's tax reporting because it affects the company's taxable income, which is then passed through to shareholders.
Form 4797 Sales of Business Property is another document often used in conjunction with Form 1120-S. It is utilized when an S Corporation sells or exchanges property used in the business. Form 4797's results help determine the S Corporation's overall income or loss, directly impacting shareholders' income as reported through Form 1120-S.
Form 8825 Rental Real Estate Income and Expenses of a Partnership or an S Corporation is used by S Corporations to report income and expenses from rental real estate. The form aligns closely with Form 1120-S because the income or loss from rentals impacts the overall income passed through to the corporation's shareholders. It mirrors the individual Schedule E but is tailored for entities.
Form 1125-A Cost of Goods Sold is filed alongside Form 1120-S by S corporations engaged in manufacturing, selling, or reselling goods. This form captures the cost of producing or purchasing the goods the corporation sells, which is vital for calculating the gross profit, a key component of the income reported on Form 1120-S.
Form 7004 Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns can indirectly relate to Form 1120-S, as S Corporations may need additional time to gather the necessary information from their shareholders before filing. Form 7004 does not extend the time to pay taxes owed but allows additional time to file the required returns accurately, including Form 1120-S.
When you're filling out Form 1120-S, the U.S. Income Tax Return for an S Corporation, paying close attention to details and following the instructions carefully can save you from making costly mistakes. Here are some tips on what you should and shouldn't do:
Following these dos and don'ts can help ensure that the process of filing Form 1120-S goes smoothly, keeping your S corporation in good standing with the IRS.
Filing taxes can often seem like navigating through a maze of forms and regulations, especially for businesses. The Form 1120-S, U.S. Income Tax Return for an S Corporation, is no exception. Several misconceptions surround this form, leading to confusion and mistakes. Below are six common misunderstandings about the Federal Supporting form, Form 1120-S, and the facts that dispel these myths.
Understanding these misconceptions and their realities is crucial for S Corporations to comply with tax regulations accurately. Dispelling these myths helps ensure that businesses file their taxes correctly, avoiding potential issues with the IRS.
Understanding how to accurately complete and utilize the Federal Supporting form, specifically Form 1120-S for S corporations, is crucial for compliance and optimal tax management. Here are key takeaways to guide you through this process:
By keeping these key points in mind, those responsible for preparing and filing Form 1120-S can ensure that the S corporation's tax obligations are met accurately and efficiently.
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