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Forms 1120-S report your corporation's taxable income to the IRS. Schedule K-1 divides that
taxable income between shareholders. Both the government and shareholder receive copies
of Schedule K-1.
Shareholders should have already paid quarterly federal tax deposits on their portion
of net income using IRS 1040ES. Any balance due is paid with their 1040 tax return.
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| Forms to use | | 1120-S Annual Tax Return for S Corporations |
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| Electing to be an S-corporation | |
You should have elected S-corporation status already by filing
IRS 2553. If you didn't,
contact the IRS to find out whether you can still file S-corporation status for this tax period.
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| How often | |
Annual requirement |
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| How to complete 1120-S | |
| How to approach and understand these forms. |
| Front page | - Complete lines 1 to 21 on page 1.
- Lines 1 to 6 are your total income less your cost of goods sold.
- You will have to provide back-up for your cost of goods sold by completing Schedule A on the back side
(the cost of inventory that you sold only; unsold inventory is not a business expense).
- Line 12 (taxes) should not include any income tax or state franchise taxes.
- Lines 7 to 21 are your overhead costs.
- Your tax advisor will need a separate list of any equipment that you purchased, its
purchase price and the purchase date, your start-up costs, auto expenses,
and any funds that went to or from shareholders.
- Lines 22 to 27 are tax calculations. S-corporation taxes are generally 0, unless your corporation
has excess net passive income
or has capital gains (in which you will need to complete 1120-S Schedule D).
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| Schedule K, page 2 and 3 | - Put your total from page 1, line 21 on line 1.
- Add other income such as investment income/loss.
- Subtract charitable contributions, section 179 expenses and depreciation.
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| Page 4 | - If your total assets or receipts are over $250,000,
you must provide a beginning and year-end balance sheet (Schedule L).
- Schedule M-1 is a reconciliation between book income and taxable income. You only need to complete it if
your total assets or receipts are over $250,000.
- M-2 show how much of your total
earnings have been distributed to shareholders and how much remains undistributed. All corporations must complete this schedule.
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Page 2
Schedule B | These questions concern your business activity, what
accounting method
you use, and some specialized questions for tax shelters. On question 9, if you have fewer than
$250,000 in total assets, answer "yes" and not complete the balance sheet and reconciliation
of income on page 4. |
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| Schedule K-1s | |
After completing 1120S, you need to divide the information from 1120S Schedule K (pages 2 and 3) between all your shareholders and prepare a 1120-S Schedule K-1 for each shareholder. The shareholders must report
this income on their 1040 tax return and must pay taxes on the income stated, even if it was not
distributed to them.
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| How to submit | |
Submit form 1120-S to the IRS with copies of your shareholders' Schedule K-1. Do not enclosed
a check.
IRS
Ogden, UT 84201-0013
You may also file 1120S on the web. The approved providers are listed at http://www.irs.gov/efile/lists/0,,id=119096,00.html.
The providers include RIA Compliance, Internet Programming and Filing, Creative Solutions, CCH, and Drake Software.
Shareholder forms and taxes: Give each shareholder a copy of their 1120-S Schedule K-1.
Shareholders must enter the amounts from 1120-S Schedule K-1 on
IRS 1040 Schedule E. Instructions
are clearly shown on 1120-S Schedule K-1.
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| Due date | |
March 15 |
| Questions? | |
Call the IRS information hotline (800) 829-4933. For forms, call
(800) 829-3676 or obtain them online at http://www.irs.gov/formspubs/index.html.
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