Complete Guide to Form 1120s

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Form 1120s is the tax form designated by the Internal Revenue Service (IRS) for S corporations to report their federal income tax liability. All S corporations are mandated to file Form 1120s annually. S corporations need to complete Form 1120S accurately to fulfill their tax obligations and maintain compliance with IRS regulations. 

The detailed info and thorough documentation in this form help both the company and its shareholders feel more confident and clear when filing taxes. In this blog, we’ll explore what Form 1120S entails, and how S corporations ensure its accurate completion. Before we dive into the details, it’s vital to understand S corporations themselves and their eligibility criteria. 

Understanding S Corporations

An S corporation is a legal business entity that is permitted under the tax code not to pay federal income tax on its profits. Instead, the corporate income, losses, credits, and deductions are “passed through” and reported on the individual tax returns of the shareholders. This process differs for traditional C corporations that face double taxation, once on their corporate profits and second on the dividends distributed to shareholders.

However, not all corporations qualify for the tax benefits of being an S corporation. To qualify as a “pass-through” entity and enjoy the benefits of S corporation status, your corporation must meet specific eligibility requirements set by the IRS. These requirements include: 

  • Being a domestic corporation (established in the US)
  • Having less than 100 shareholders
  • Featuring only one class of stock

Requirements to complete Form 1120s

Accurate filing of Form 1120S necessitates gathering specific information about your S corporation. This includes basic corporation information such as legal name, Employer Identification Number (EIN), date of incorporation, and accounting information. Additionally, shareholder information and details of all income sources, business expenses, and any relevant 1099 forms are required.

Key components of Form 1120s

In the form 1120S, there are several sections designed to capture the financial activities of the S corporation:

  • Part 1- Tax Computation: Computes the S corporation’s taxable income, adjusting for any necessary income or loss considerations.
  • Part II – Shareholder Information: Provides each shareholder’s portion of the S corporation’s income, losses, deductions, and credits, reported on Schedule K-1.
  • Part III – Balance Sheets: Summarizes the S corporation’s financial status at the beginning and end of the tax year.
  • Schedules: Various supplemental schedules may be needed based on the S corporation’s tax circumstances, offering further details on specific income or expenses.

Filing Requirements and Resources

The deadline for filing Form 1120S typically falls on the 15th day of the third month following the close of the S corporation’s tax year. However, under specific circumstances, extensions may be available. 

While the IRS website offers resources, filing Form 1120s can be complex. Consulting with a reputed tax preparation outsourcing service provider like Outsourcing Business Solutions (OBS) with a team of experienced tax experts can ensure the accurate completion and filing of Form 1120s for your S corporation. OBS not only offers specialized 1120s outsourcing services tailored to the specific needs of S corporations but is also popular for their 1040 & 1099 outsourcing services. 

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