If you have formed a limited liability company that is being taxed as an S corporation, also called an S Corp, you will at some point need to become acquainted with form 1120-S. The IRS Form 1120-S is a tax document that you will use to furnish financial information to the Internal Revenue Service. You’ll need the 1120-S form to report your company’s yearly financial activity, including your business’s gains, losses, credits and dividends. In other words, your S corporation’s annual corporate tax return is Form 1120-S. That said, you will still need to file your own personal federal income tax return. If you need help with this or other financial matters, consider working with a financial advisor who focuses on tax planning.
Some Helpful Tips to Know About Form 1120-S
An S Corporation, or S Corp, is a way to tax your limited liability company, as well as it’s own legal entity. S Corp businesses are required to file form 1120-S. If you aren’t familiar with the form 1120-S, there are a few factors you’ll want to keep in mind. You can typically take care of all of your worries if you hire an accredited tax preparer to help you file your 1120-S form, but here are some additional tips to be aware of if you’re filing on your own.
- Haste could make waste: Form 1120-S could easily be confused with Form 1120, which is a U.S. Corporation Income Tax Return, appropriate for a C Corp but not an S Corp.
- Watch the calendar: The deadline to file Form 1120-S is on the 15th day of the third month, which is usually March 15, unless March 15 lands on a holiday or weekend. If filing the 1120-S form by the deadline isn’t feasible, the S corporation can request an extension (by filing IRS form 7004).
- Don’t procrastinate: If the form 1120-S isn’t filed on time or filed late, without an extension, there may be a fairly significant penalty.
What Information Is on Form 1120-S
The information you’ll need for Form 1120-S is probably what you would expect. You’ll want to have some of this material on hand, to put on the 1120-S or give to your tax preparer:
- Gross receipts and gross profits from your business
- Compensation that shareholders received as well as salaries or wages paid to employees or 1099 payments to independent contractors who may have worked for your business.
- Losses, such as cash or credit refunds issued to customers.
- Canceled or forgiven non-shareholder business debt, if you have any.
- Cost of doing business, such as the expenditure on goods that you used to create products that your business sells.
- Estimated tax payments that you’ve made in the last year.
How to File IRS Form 1120-S
If you work with a tax accountant, your job will be largely done after you furnish the information needed to fill out Form 1120-S and the rest of your tax paperwork. The tax preparer will do the rest. If you, however, are going to file IRS Form 1120-S, you’ll particularly want to pay attention to the Schedule’s. There are several Schedules that you may need to add to Form 1120, including:
- Schedule B: You’ll need this if you will be reporting canceled or forgiven non-shareholder business debt and 1099 payments to independent contractors who performed work for you in the last year.
- Schedule K: Here’s where you will put financial information such as each shareholder’s share of income as well as deductions and credits. This is also where you will reveal the pass-through income that will be on your personal tax return. Pass-through income are the profits that your business earns that are distributed to owners and shareholders without the S Corp paying taxes. The owners and shareholders, however, will pay taxes on that revenue on their personal federal income tax return. This is done so that the money isn’t double taxed (through the corporation and then through the owners and shareholders).
- Schedule L: This is an overview of your business, with information such as cash on hand, inventory, loans to shareholders and liabilities. This is essentially a balance sheet and if your S Corp brings in less than $250,000 in revenue a year, you don’t have to fill this out.
- Schedule M-1 and Schedule M-2: Schedule M-1 reconciles business revenue or losses with information provided on Schedule K. Schedule M-2 reports adjustments, including accumulating earnings or profits. If your business’s assets are less than $25,000 by the end of the tax year, you would not fill out either of these.
The Bottom Line
Incorporating as an S Corp can be complicated if you do it on your own. Still, if you’re detail-oriented and enjoy crunching numbers, you may enjoy filing your own taxes. If you do not, you’ll probably want a tax advisor to fill out your form 1120-S and possibly to do your federal and state personal taxes as well – or to seek out financial advisors with tax planning services. Starting with the March 15 filing deadline that you don’t want to miss, there are a lot of little details involving form 1120-S that you wouldn’t want to fall through the cracks.
Tips for Tax Planning
- Taxes can be a difficult thing to properly plan for if you’re not an expert. It might benefit you to work with an expert who can help you better limit your tax liability and help you with other financial advisors. A financial advisor can do just that and finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you’re trying to file taxes on your own then you’ll want to understand how it works and what potential credits or deductions you might qualify for. Consider reading SmartAsset’s guide to small business taxes to learn about all of these things.
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