Form 1120-S: U S. Income Tax Return for an S Corporation

If the corporation receives its mail in care of a third party (such as an accountant or accounting advisory an attorney), enter “C/O” on the street address line, followed by the third party’s name and street address or P.O. Rental of property is incidental to an activity of holding property for investment if both of the following apply. The following information must be provided on an attachment to Schedule K-1 for each activity. Material advisors to any reportable transaction must disclose certain information about the reportable transaction by filing Form 8918, Material Advisor Disclosure Statement, with the IRS.

1. Having “S corp” status means your corporation doesn’t have to pay federal corporate income tax.
2. The amount listed on line 16 as code B includes the shareholder’s pro rata share of tax-exempt income as a result of the S corporation making an elective payment election under section 6417.
3. Generally, the result is the corporation’s unrecaptured section 1250 gain.
4. Under this election, the corporation will be treated as also having made the election to distribute AE&P first.
5. The election results in shareholders reporting the corporation’s income and losses on their personal tax returns instead of the corporation paying taxes on its income.
6. For example,  ONESOURCE corporate tax software has modules for tax planning and preparation that can help streamline the process and make tax preparation more efficient.

A corporation can elect to expense part or all of the cost of certain property the corporation purchased during the tax year for use in its trade or business or certain rental activities. 946 for a definition of what kind of property qualifies for the section 179 expense deduction and the Instructions for Form 4562 for limitations on the amount of the section 179 expense deduction. Gain from the sale or exchange of qualified small business (QSB) stock (as defined in the Instructions for Schedule D) that is eligible for the section 1202 exclusion. The section 1202 exclusion applies only to QSB stock held by the corporation for more than 5 years. Report each shareholder’s share of section 1202 gain on Schedule K-1. Each shareholder will determine if they qualify for the exclusion.

Report on this line income included on Schedule K, lines 1, 2, 3c, 4, 5a, 6, 7, 8a, 9, and 10 not recorded on the books this year. Corporations with total assets of $10 million or more on the last day of the tax year must file Schedule M-3 (Form 1120-S) instead of Schedule M-1. See the separate collect synonym Instructions for Schedule M-3 (Form 1120-S) for provisions that also affect Schedule L. Examples of items reported using code U may include the following.

S Corporations vs. other types of businesses

Any other information the shareholders need to prepare their tax returns, including information needed to prepare state and local tax returns. In box 17 of Schedule K-1, enter code AN followed by an asterisk and enter “STMT” in the entry space for the dollar amount. Attach a statement to Schedule K-1 that provides the shareholder’s pro rata share of the following amounts. In addition, the S corporation must also report whether any of its trades or businesses are specified service trades or businesses (SSTBs) and identify on the statement any trades or businesses that are aggregated.

State taxes paid by S corporations

The business’s income and expenses are reported on the owner’s personal tax return, so no separate tax form is required for the business itself. All income from the business is typically subject to self-employment taxes. The business pays a corporate-level federal tax on its own income using Form 1120, while shareholders also pay personal income tax on dividends paid to them by the corporation. In addition, many states permit S corporations to pay state income taxes for their shareholders at the corporate level.

When is the deadline for filing my S corp’s taxes?

Report each shareholder’s pro rata share of qualified rehabilitation expenditures related to activities other than rental real estate activities in box 17 of Schedule K-1 using code C. Attach a statement to Schedule K-1 that provides the information and the shareholder’s pro rata share of the basis and expenditure amounts the shareholder will need to figure the amounts to report in Part VII of Form 3468. If the corporation has expenditures from more than one activity, identify on a statement attached to Schedule K-1 the information and amounts for each separate activity. Enter amounts paid by the corporation that would be allowed as itemized deductions on any of the shareholders’ income tax returns if they were paid directly by a shareholder for the same purpose.

Filing requirements:

But with reasonable cause you may be able to request relief for the late election on Form 2553. See “Relief for Late Elections” in the Instructions for Form 2553. If the corporation has a foreign address, include the city or town, state or province, country, and foreign postal code. Follow the country’s practice for entering the name of the state or province and postal code. Generally, the corporation must provide certain information to the shareholder if the corporation knows, or has reason to know, the following. The information described in this section should be given directly to the shareholder and shouldn’t be reported by the corporation to the IRS.

Generally, tax returns and return information are confidential, as required by section 6103. Provide information shareholders need to complete the gross receipts test for section 448(c) purposes. If the S corporation holds a direct or indirect interest in an RPE that aggregates multiple trades or businesses, the S corporation must also include a copy of the RPE’s how to complete form w aggregations with each shareholder’s Schedule K-1. The S corporation can’t break apart the aggregation of another RPE, but it may add trades or businesses to the aggregation, assuming the aggregation requirements are satisfied. If the S corporation directly or indirectly owns an interest in another relevant pass-through entity (RPE) that aggregates multiple trades or businesses, it must attach a copy of the RPE’s aggregation to each Schedule K-1.