Form 1120-S is a tax form used by S corporations to report the flow-through of items from the corporation to its shareholders. It is used to report a corporation’s finances, as well as information about its shareholders.
Form 1120-S requires you to report the income, gains, losses, deductions, and credits of your S corporation in addition to the distributions and allocations the corporation made to shareholders for tax purposes.
Form 1120-S is due by the 15th day of the 3rd month following the end of the corporation’s tax year. Find out more about how to go about completing Form 1120-S for your S corporation business.
How to fill out Form 1120-S
- Keep your accounting records and financial statements up-to-date. An accurate balance sheet and income statement helps to make preparing your S Corporation tax return extremely easy every year and will ensure that you don’t run the risk of reporting too much (or too little) income. If your business grows big enough, you’ll be required to report your balance sheet on Schedule L of your S corporation’s tax return.
Record your income. The first section of Form 1120-S is where your business’s income and cost of goods sold are recorded.
Record your expenses. The second section of Form 1120-S is where your business’s expenses are recorded.
Calculate your net profit or loss. Subtract your total expenses from your gross income to compute your net profit or loss. On an S Corporation tax return, the technical name for your business’s profit or loss is “ordinary income or loss”.
Record taxes owed and payments made. The vast majority of S Corporations do not owe taxes at the business entity level. As discussed before, shareholders normally pay taxes on their share of the business’s profits on their individual tax returns. There are several limited circumstances where an S Corporation would owe taxes at the entity level. This is the section where these tax liabilities would be recorded.
Answer questions on Schedule B. Stretching over all of Page 2 and onto Page 3 of Form 1120-S, Schedule B can be thought of as a questionnaire that encompasses various areas of your business. The questions range from asking about the business’s stock structure to ownership interest by shareholders.
Complete Schedule K. This schedule is what will be used to allocate dollar amounts and other information from Form 1120-S to the shareholders.
Complete Schedule L. If required, complete Schedule L. This is where you would report your business’s balance sheet.
Complete Schedule M-1. This schedule is where you reconcile taxable vs. non-taxable income and deductible vs. non-deductible expenses.
Complete Schedule M-2. This schedule is a more detailed look at the shareholders’ capital accounts.
Your corporation should provide each shareholder with a copy of their Schedule K-1, the form used to report a shareholder’s share of the income, deductions, credits, and other items of an S corporation, which forms part of the Form 1120-S submission and, if applicable, Schedule K-3, which provides additional information about the corporation’s financial activity, by the 15th day of the 3rd month after the end of the corporation’s tax year.
To request an extension, you can make use of Form 7004 – which will grant an automatic 6-month extension of time to file Form 1120-S.
It is advisable to get in touch with our team of tax experts if you have any questions about filing a tax return for your S Corporation or if you need to know how to go about reporting the corresponding information on your individual tax return.
It is best practice for businesses to keep accurate financial records that showcase and justifies all income and expenses of an S corporation. Software solutions such as QuickBooks and Netsuite can help you stay on top of the financial information required when filing Form 1065. Failure to file the relevant forms can result in penalties, so we encourage you to begin preparation on Form 1120-S or contact a Fusion CPA as soon as possible, if you need help. Our team can provide you with guidance on 1120-S form instructions via a free discovery call.
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.
