Form 1120-S

Form 1120-S (U.S. Income Tax Return for an S Corporation) is the annual federal tax return filed by corporations that have elected S-Corporation status under Subchapter S of the Internal Revenue Code, allowing them to pass corporate income, losses, deductions, and credits through to shareholders for federal tax purposes — avoiding the double taxation that applies to C-Corporations. Form 1120-S is due March 15 (or the 15th day of the third month after the fiscal year end), with a 6-month extension available via Form 7004. Like partnerships, S-Corps are pass-through entities: the corporation reports its financial results on Form 1120-S and issues Schedule K-1 to each shareholder showing their pro-rata share of income and deductions. However, S-Corps have critical eligibility restrictions: maximum of 100 shareholders, only U.S. citizens and resident aliens as shareholders (no foreign persons), only individuals, certain trusts, and estates as shareholders (no partnerships or corporations), and only one class of stock. Form 1120-S includes Schedule D (capital gains and losses), Schedule K (shareholders' pro-rata share items), Form 1125-A (cost of goods sold), and Schedule L/M-1/M-2 for reconciliation. The late filing penalty under IRC Section 6699 is $220 per shareholder per month of delinquency for up to 12 months. For S-Corp shareholders who are also employees, reasonable compensation requirements mandate W-2 wages subject to FICA taxes (15.3% on the first $168,600 in 2024), with the remaining profit distributions avoiding self-employment tax — the primary tax advantage of S-Corp election that typically saves owners $5,000–$30,000+ annually depending on profit levels. doola assists businesses in maintaining S-Corp compliance, preparing Form 1120-S, and ensuring reasonable compensation determinations withstand IRS scrutiny.