Form 1120-S explained
U.S. Income Tax Return for an S Corporation
Form 1120-S is the annual return an S corporation files. The corporation pays no federal income tax on its profits: each shareholder receives a Schedule K-1 and reports their share on their own return.
- Who files it
- Every corporation, and every LLC, that has a valid S election in effect for the year.
- Where it goes
- The IRS. Each shareholder receives their own Schedule K-1.
- When it is due
- The fifteenth day of the third month after the tax year ends, so 15 March for a calendar-year corporation. An extension moves it six months.
- What it is not
- It does not report an owner's wages. An owner who works in the business is an employee and is paid on a W-2, and those wages are a deduction on the 1120-S rather than a distribution.
What it reports
The schedules mirror the partnership return closely, and the differences are where the S corporation rules live.
| Schedule | What it reports |
|---|---|
| Page 1 | Ordinary business income or loss, after deducting officer compensation and salaries. |
| Schedule B | Questions about the corporation's accounting method, ownership, and elections. |
| Schedule K | The corporation's totals for every item that passes through to shareholders. |
| Schedule K-1 | One per shareholder, allocated strictly by share ownership. |
| Schedule L | The balance sheet from the corporation's books. |
| Schedules M-1 and M-2 | Book-to-tax reconciliation, and the accumulated adjustments account. |
Allocation is by ownership, with no exceptions
A partnership can allocate income between partners in ways their agreement sets out. An S corporation cannot: every pass-through item is split strictly in proportion to shares held, for every day of the year. That single rule is the largest practical difference between the two returns.
Reasonable compensation
An owner working in an S corporation must be paid a reasonable wage on a W-2 before taking distributions. Distributions are not subject to employment tax and wages are, which is why the rule exists and why it is examined.
LedgerBox does not read this form
LedgerBox does not read Form 1120-S or Schedule K-1. It reads the bank statements, invoices, receipts, and pay stubs the corporation's books are built from.
Form 1120-S questions
Can an LLC file Form 1120-S?
Yes, if it has made a valid S election. The legal form and the tax classification are separate questions.
What happens if the S election is invalid?
The entity is taxed as a C corporation for the year, which means tax at the corporate level and no pass-through. Elections are checked more often than owners expect.
Does an S corporation ever pay federal tax?
Occasionally. Built-in gains tax and excess net passive income tax both fall on the corporation itself, and both arise from a prior C corporation history.
Read next
- Form 1065, the partnership return The other pass-through return, and how allocation differs.
- Form W-2 How an owner-employee's wages are reported.
- Convert bank statements to Excel and CSV The records the return is built from.
Reference pages on the forms that arrive with a set of books. Every form in the glossary