Form 1120-S filing fundamentals for your business
5 min read
September 27, 2023 • Block Advisors
Not all small businesses are alike, and neither are their taxes. For S corporations, the reporting of certain taxable activity is “passed through” to the company’s shareholders. But that doesn’t mean the Internal Revenue Service doesn’t need a record of it. So, where is all that information captured? The answer is Form 1120-S.
What is IRS 1120-S?
IRS Form 1120-S is the tax form S corporations use to file a federal income tax return. This tax form informs the IRS of your total taxable earnings in a tax year. It’s used to determine an S corporation’s business’ income, gains, losses, tax credits, and deductions.
Who should fill out the 1120-S Tax Form?
Every S corporation should file the 1120-S tax form, including LLCs taxed as S corporations. Employees or shareholders of an S corporation don’t need to file this form. Earnings should be reported on their individual federal tax return. Employees will receive a W-2 form from the corporation, while shareholders will receive a Schedule K-1 (Form 1120-S).
If you want to elect S corporation status, you should file Form 2553 to transition your business to an S corporation either during the corporation’s first tax year for which you want to make the election or within the first 2.5 months following that first tax year. Once you elect treatment as an S corporation you should file the 1120-S tax form each year for federal tax purposes.
Take note! This tax form is similar in name and makeup to IRS Form 1120, which C corporations file. But S corporations should always file the IRS 1120-S. Need a refresher on other business types? Check out our business entity 101 post.
Want more in-depth help with choosing a business entity? We’ve got your back. Block Advisors has business formation products and services to equip you with the information to help you navigate this important step for your company.
What information is on Tax Form 1120-S?
Tax Form 1120-S requests the following information:
- Accounting method
- Balance sheet
- Business activity code
- Business stock information
- Date the business elected to be an S corporation
- Date the business was incorporated
- Employer Identification Number (EIN)
- Fixed assets
- Income statement
- Income tax payments
- Number of shareholder transaction listings / number of shareholders
- Number of 1099 contract workers and W-2 employees
- Total taxable income: Reported by assets, profits, losses, and deductions
Form 1120-S instructions
If you want to do your taxes on your own, we’ve outlined the Form 1120-S instructions below. But we’re guessing you’d rather get back to running your business. You can always let one of our small business certified tax pros take care of this paperwork for you.
This section has you complete basic identifying information for your business, like S Corp election effective date, business activity code, name, address, EIN, date incorporated, total assets, number of shareholders, etc. This section also has you provide the profit and loss information through income, deductions, and tax payments.
If you’re paper filing, you also need to sign Part I. If we’re filing for you, your tax professional will also sign Part I.
1120-S has schedules within the form. The first is Schedule B. In this area, you’ll include the:
- Name of your corporation and EIN.
- Information on shareholders: Name, SSN/EIN, type of shareholder record, person responsible for reporting shareholder income, deductions, credits, and more from Schedule K-1.
The second schedule on the form is Schedule K, which summarizes income, tax deductions, and tax credits for your S corporation’s shareholders within the tax year.
This section determines your business’ balance sheet, including total assets and insurance liabilities.
- If you answered “Yes” to 11a and 11b on Schedule B, you don’t need to complete Schedule L.
- If you answered “No” to either or both questions, you must complete Schedule L.
Schedule M-1 is required when a business’ gross receipts or total assets at year-end are more than $250,000. This section helps you reconcile income or loss per book with your return.
If you fill out Schedule L, you should also complete Schedule M-1. This section helps reconcile what’s reported on your financial statements (books) to your corporate tax return.
The final section of the 1120-S is Schedule M-2, which is dedicated to reporting the accumulated adjustment accounts (AAA). Line 8 of this schedule tells you the corporation’s year-end AAA balance. This section is not always required to be filled out.
Is an S Corp the right structure for my business?
Answer these six questions to help you find your fit.
Can you file the 1120-S online?
You can file 1120-S online using a tax filing software for businesses. But if you don’t want to take the time to complete these forms, Block Advisors has your back. Take back the time it takes to complete complex tax forms. Let a certified small business tax pro–armed with an average of 12 years of experience—help you.
When is the form due?
The deadline is the 15th day of the third month after the end of your tax year. So, if your business’ tax year ends on December 31, your due date is on March 15 each year. (This is unless it falls on a weekend or holiday, then it’s usually the Monday after.)
When you need more time to get your return together, you can file for a corporate tax return extension using IRS Form 7004. The due date for an extended return is September 15, and you can e-file IRS Form 7004. (Same goes for the deadline here—if it falls on a weekend or holiday, the due date is the following Monday.)
If your company dissolves, you should file on the 15th day of the third month after your company has shut down.
More help with small business taxes
Remember—you don’t have to take on taxes all by yourself. Let us handle tax, bookkeeping, and payroll so you can get back to what you love. Make an appointment with a Block Advisors expert today!