U.S. Income Tax Return for an S Corporation Form 1120-S
U.S. Income Tax Return for an S Corporation Form 1120-S. Do not file Form 1120-S unless the corporation has filed Form 2553, Election for Sub S status. Your CPA Firm can assist you with the
How To Make the Sub S Status Election?
For details about the election, see Form 2553, Election by a Small Business Corporation, and the Instructions for Form 2553.
What Is Form the 1120S: U.S. Income Tax Return?
Form the 1120S: U.S. Income Tax Return for an S Corporation is a tax document that is used to report the income, losses, and dividends of S corporation shareholders. Essentially, Form the 1120S is an S corporation’s tax return.
The Schedule K-1 is a form that can be attached to Form 1120S or Form 1065. The Schedule K-1 form identifies the percentage of company shares owned by each shareholder for the tax year and must be prepared for every shareholder.
Who Must File
A corporation or other entity must file Form 1120-S if (a) it elected to be an S corporation by filing Form 2553, (b) the IRS accepted the election, and (c) the election remains in effect. After filing Form 2553, you should have received confirmation that Form 2553 was accepted. If you didn’t receive notification of acceptance or non-acceptance of the election within 2 months of filing Form 2553 (5 months if you checked box Q1 to ask for a letter ruling), take follow-up action by calling 1-800-829-4933. Don’t file Form 1120-S for any tax year before the year the election takes effect.
Relief for late elections. If you haven’t filed Form 2553 or didn’t file Form 2553 on time, you may be entitled to relief for a late-filed election to be an S corporation. See the Instructions for Form 2553 for details.
Termination of Election
Once the election is made, it stays in effect until it is terminated. If the election is terminated, the corporation (or a successor corporation) can make another election on Form 2553 only with IRS consent for any tax year before the fifth tax year after the first tax year in which the termination took effect. See Regulations section 1.1362-5 for details.
An election terminates automatically in any of the following cases.
The corporation is no longer a small business corporation as defined in section 1361(b). This kind of termination of an election is effective as of the day the corporation no longer meets the definition of a small business corporation. Attach to Form 1120-S for the final year of the S corporation a statement notifying the IRS of the termination and the date it occurred.
The corporation, for each of 3 consecutive tax years (a) has accumulated earnings and profits, and (b) derives more than 25% of its gross receipts from passive investment income as defined in section 1362(d)(3)(C). The election terminates on the first day of the first tax year beginning after the third consecutive tax year. The corporation must pay a tax for each year it has excess net passive income. See the line 22a instructions for details on how to figure the tax.
The election is revoked. An election can be revoked only with the consent of shareholders who, at the time the revocation is made, hold more than 50% of the number of issued and outstanding shares of stock (including nonvoting stock). The revocation can specify an effective revocation date that is on or after the day the revocation is filed. If no date is specified, the revocation is effective at the start of the tax year if the revocation is made on or before the 15th day of the 3rd month of that tax year. If no date is specified and the revocation is made after the 15th day of the 3rd month of the tax year, the revocation is effective at the start of the next tax year.
To revoke the election, the corporation must file a statement with the appropriate service center listed under Where To File in the Instructions for Form 2553. In the statement, the corporation must notify the IRS that it is revoking its election to be an S corporation. The statement must be signed by each shareholder who consents to the revocation and contains the information required by Regulations section 1.1362-6(a)(3).
A revocation can be rescinded before it takes effect. See Regulations section 1.1362-6(a)(4) for details.
For rules on allocating income and deductions between an S corporation’s short year and a C corporation’s short year and other special rules that apply when an election is terminated, see section 1362(e) and Regulations section 1.1362-3.
If an election was terminated under (1) or (2) above, and the corporation believes the termination was inadvertent, the corporation can ask for permission from the IRS to continue to be treated as an S corporation. See Regulations section 1.1362-4 for the specific requirements that must be met to qualify for inadvertent termination relief.
Corporations can generally electronically file (e-file) Form 1120-S, related forms, schedules, statements, and attachments; Form 7004 (automatic extension of time to file); and Forms 940, 941, and 944 (employment tax returns). Form 1099 and other information returns can also be electronically filed. The option to e-file doesn’t, however, apply to certain returns.
Certain corporations with total assets of $10 million or more that file at least 250 returns a year are required to e-file Form 1120-S. See Regulations section 301.6037-2. However, these corporations can ask for a waiver of the electronic filing requirements. See Notice 2010-13, 2010-4 I.R.B. 327.
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