Form 1120S is the S Corporation Tax Return, and it is used by S corporations to report their income, deductions, gains, losses, and credits for a given tax year. S corporations are a type of corporation that are taxed similarly to partnerships, with the company’s income and expenses passing through to the shareholders’ personal tax returns. This article will provide a detailed guide on how to complete Form 1120S, including the necessary forms and schedules, deadlines, and other important considerations.
1: Before You Begin
Before you start filling out Form 1120S, you need to make sure you have all the necessary information and documentation. This includes:
- The company’s EIN (Employer Identification Number)
- The company’s legal name and address
- A record of all the company’s income, deductions, gains, losses, and credits for the tax year in question
- Any applicable tax forms or schedules (see below)
- A record of any estimated tax payments made during the year
2: Understanding Form 1120S
Form 1120S is a multi-page form with several sections, each of which requires specific information to be provided. The following is a breakdown of each section and the information required:
Section 1: Identification
This section requires you to provide basic information about the company, including the name, address, EIN, and tax year.
Section 2: Income
This section requires you to report all the company’s income for the tax year in question. This includes:
- Gross receipts or sales
- Cost of goods sold
- Gross profit
- Other income, such as interest or dividends
Section 3: Deductions
This section requires you to report all the company’s deductions for the tax year in question. This includes:
- Compensation of officers
- Salaries and wages
- Repairs and maintenance
- Taxes and licenses
- Bad debts
- Charitable contributions
- Employee benefit programs
- Other deductions
Section 4: Credits
This section requires you to report any tax credits the company is eligible for, such as the research and development credit or the small employer health insurance credit.
Section 5: Other Information
This section requires you to provide additional information, such as whether the company is a qualified subchapter S subsidiary or whether it has foreign assets.
Section 6: Tax Calculation
This section calculates the company’s taxable income and the tax owed. It also requires you to report any estimated tax payments made during the tax year.
In addition to Form 1120S, you may also need to complete several schedules, depending on the company’s activities and circumstances. The most common schedules are:
Schedule K-1: Shareholder’s Share of Income, Deductions, Credits, etc.
This schedule reports each shareholder’s share of the company’s income, deductions, credits, and other items. Each shareholder receives a copy of this schedule to include on their personal tax return.
Schedule D: Capital Gains and Losses
This schedule reports the company’s capital gains and losses for the tax year.
Schedule L: Balance Sheet per Books
This schedule reports the company’s assets, liabilities, and equity at the end of the tax year.
Schedule M-1: Reconciliation of Income (Loss) per Books With Income per Return
This schedule reconciles the company’s income or loss as reported on the tax return with the income or loss as reported in the company’s financial statements.
Schedule M-2: Analysis of Unappropriated Retained Earnings per Books
This schedule reports the company’s unappropriated retained earnings.
4 : Deadlines and Other Considerations
The deadline for filing Form 1120S is March 15th of the following year, unless the company has filed for an extension. If an extension is granted, the deadline is September 15th. It is important to note that even if the company is not required to pay any tax, it must still file a tax return by the deadline.
If the company owes taxes, it can make estimated tax payments throughout the year to avoid penalties and interest. These payments are typically made quarterly and are based on the company’s expected tax liability for the year.
It is also important to maintain accurate records and documentation to support the information reported on Form 1120S. This includes keeping track of all income and expenses, as well as any tax forms or schedules.
In the event of an audit or other inquiry by the IRS, the company may be required to provide additional documentation to support the information reported on the tax return. It is important to keep these records organized and readily accessible.
Completing Form 1120S can be a complex process, but with the right information and documentation, it can be done accurately and efficiently. It is important to understand the requirements for each section of the form, as well as any applicable schedules, deadlines, and other considerations.
If you are unsure about how to complete Form 1120S or need assistance with other tax-related matters, it is recommended to seek our qualified tax professional.