How to fill out form 1120-S

Form 1120-S is an income tax return for S corporations. S corporations are corporations that have elected to pass their income, losses, deductions, and credits through to their shareholders for federal tax purposes. This means that the shareholders of an S corporation report their share of the corporation’s income and losses on their personal tax returns, and are assessed tax at their individual income tax rates.

In addition to Form 1120-S, S corporations may also need to file other forms, such as Form 2553, Election by a Small Business Corporation, and Schedule K-1, Shareholder’s Share of Income, Deductions, Credits, etc.

To start, let’s review how to fill out form 1120-S.

Form 1120-S Instructions

1. Gather your information

• Business Details:
  • Name
  • Taxpayer Identification Number (TIN)
  • Address
  • Fiscal Year
• Financial Information:
  • Income and expenses
• Shareholder Information:
  • Names and addresses

2. Download the form

Download the latest Form 1120-S from the IRS website.

3. Basic Information

Pages 1-2: Fill in the corporation’s and shareholders’ identification details.

• Lines A-J: These lines identify the corporation and its shareholders. The information on these lines can be found in the corporation’s articles of incorporation, bylaws, and shareholder records.

4. Income and Expenses

Lines 1-27: Report the corporation’s income and expenses.

5. Schedule B: Distributions

• Lines 1-11b: Report accumulated earnings and profits (AE&P).
• Lines 12-15: Report distributions to shareholders.

6. Schedule K-1: Shareholder’s Share

Complete a separate Schedule K-1 for each shareholder, detailing their share of income, deductions, credits, etc.

Note: If you’re the sole shareholder, you don’t need a separate Schedule K-1.

7. Schedule L: Balance Sheets

Report the corporation’s assets, liabilities, and equity.

8. Schedules M-1 and M-2:

Reconcile book income to taxable income and reconcile retained earnings.

9. File Your Return

• Electronically: Use the IRS e-file system.
• By Mail: Send to the IRS address listed on the form.

Common Pitfalls to Avoid:

• Incomplete Information: Ensure all required information is provided.
• Calculation Errors: Double-check calculations to avoid mistakes.
• Filing Errors: Follow IRS instructions carefully.
• Late Filing: File your return on time to avoid penalties.

For Complex Situations or Questions, Consult a Tax Professional.

By following these steps and addressing common pitfalls, you can successfully file Form 1120-S and comply with tax regulations.