What Forms Do I Need to File for an S Corporation?

By Roberta Codemo

What Forms Do I Need to File for an S Corporation?

By Roberta Codemo

Incorporating a business gives its owners, or shareholders, certain legal and tax advantages. The Internal Revenue Service (IRS) automatically classifies an incorporated business as a C corporation for tax purposes. Its shareholders, however, have the option to elect to become an S corporation without losing the limited liability protection that a corporation provides. The name "S corp." comes from Subchapter S of the Internal Revenue Code.

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S Corporation Benefits and Requirements

An S corporation is an attractive option for businesses. As a “pass-through" entity similar to a partnership, an S corp. allows its shareholders to elect to pass the corporation's profits and losses through the corporation to the individual shareholders, who then report it on their personal income tax returns for federal tax purposes. This lets the corporation avoid the double taxation that C corporations are subject to, where both the corporation and its shareholders pay taxes on corporate income. An S corp. must still file an informational income tax return at tax time.

Some of the requirements for an S corporation include:

  • It must be a domestic corporation.
  • It can have a maximum of 100 shareholders, who must be individuals, estates, or certain types of trusts.
  • It can only issue one class of stock. The stock cannot be held by nonresident aliens.
  • All shareholders must elect to become an S corporation.

Below is a brief overview of the forms that an S corp. needs to file with the IRS.

Election by a Small Business Corporation (Form 2553)

Form 2553 simply states a corporation's intent to elect to become an S corporation. The form must be filed within two months and 15 days after the beginning of the tax year—or March 15, if the corporation follows the calendar year—in which the election is to take effect. The form must list all corporate shareholders at the time of the election and each shareholder must sign and date the form. It takes about two months for the IRS to approve the filing.

U.S. Income Tax Return for an S Corporation (Form 1120S)

An S corp. is required to file an annual federal income tax return, using Form 1120S, no later than March 15. The form must report the S corporation's income, deductions, and credits. This return is merely for informational purposes.

If the S corporation is unable to file its return by March 15, it must file Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns (Form 7004) to request a six-month extension. If it still has not submitted its return at the end of this time, the IRS assesses a minimum penalty for each month the return is late multiplied by the number of shareholders. The corporate shareholders are subject to the same deadlines as individual taxpayers, April 15.

Shareholder's Share of Income, Deductions, Credits, etc. (Schedule K-1)

An S corp. must send each shareholder a Schedule K-1, which shows that individual's share of the corporation's income, losses, deductions, and credits. This information comes from Form 1120S. Shareholders report the information found on Schedule K-1 on their individual federal tax returns. The S corporation must include a copy of each shareholder's Schedule K-1 with its own corporate tax return.

Employment Tax Forms

The S corp. is subject to further filing requirements if it has employees. By law, it must withhold employment taxes—federal income tax, Social Security, and Medicare—from each employee's paycheck. Further, if a shareholder is employed by the S corporation, the corporation must pay that individual a salary, which is also subject to employment taxes. The S corporation must file quarterly employer tax returns using Employer's Quarterly Federal Tax Return (Form 941). This form is due on January 31, April 30, July 31, and October 31.

Further, if the corporation pays wages of $1,500 or more during a calendar quarter or has at least one employee working part-time for 20 or more separate weeks, it must file Employer's Annual Federal Unemployment Tax Return (Form 940). This form is due on January 31. If you deposit all your FUTA tax when it is due, you have until February 12 to file.

State Taxes

Depending on which state your S corporation is incorporated in, it may have to pay state taxes. In these states, the corporation must file a separate state income tax return. Some states may even require the S corp. to file an informational state tax return. Most states also collect employment taxes. It's always a good idea to check with your state's Department of Revenue or similar agency for more information.

Don't try this alone. Setting up an S corp. and meeting the paperwork requirements requires someone knowledgeable with the laws in your state to make sure everything is above board.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.