How to Analyze an 1120S Tax Return

by Mark Fitzpatrick ; Updated July 27, 2017
S-Corporations must use the 1120S Tax Return form by the IRS in order to file their losses and profits correctly.

Items you will need

  • 1120S tax return
  • Accounting records
  • IRS identification numbers
  • Form 2553

The Internal Revenue Service (IRS) structures multiple tax forms for every sort of business within the United States. Two dominant types of corporations are S-Corporations and C-Corporations. S-Corporations do not have to pay federal income taxes. Instead, the shareholders of the company must report their own individual losses or gains as shareholders. This incentive allows an S-Corporation the benefit of not being “double-taxed”; having shareholders taxed and the company being taxed. Still, a tax form, the 1120S, needs to be filed by an S-Corporation. This form proves to the IRS the corporation is an S-Corporation and guarantees an appropriate tax return for the business.

Step 1

Fill out the top part of the 1120S form like any corporate tax return. The 1120S form should have typical questions such as IRS identification numbers for your business and services.

Step 2

Determine when you officially became an S-Corporation. The IRS needs to determine if your company has been a S-Corporation since the beginning of the tax year. If this tax return is the first 1120S form for your company, you need to fill out and attach the IRS Form 2553 with this return.

Step 3

Indicate the number of shareholders the S-Corporation has. The only way your company can still be filed as a S-Corporation is if there are under 100 shareholders to the company. Filing a higher number will disqualify you as a S-Corporation.

Step 4

Note all your deductions. As an S-Corporation, you are entitled to around 12 deductions. Investigate your accounting records to see how much you invested in aspects like advertising, maintenance, compensation of tax officers, pension plans or employee benefit programs.

Step 5

Record your net purchases, inventory and labor costs in Section A. Like any business, a S-Corporation must record to the IRS the typical capital purchases and labor costs.

Step 6

Answer if the company owned more than 50 percent of stocks from another corporation. These stocks must be recorded on the 1120S.

Step 7

Record assets gained from transactions with a C-Corporation or if the S-Corporation has assets still from when it was a C-Corporation. These assets are recorded differently by the IRS since they come from a C-Corporation.

Step 8

Record the basic information on your shareholders. This includes the assets and losses given to the shareholders. The IRS will use what your company states about the shareholders to compare with any shareholder's tax return.

About the Author

Mark Fitzpatrick began writing professionally in 2006. He has written in literary journals such as Read Herrings and provides written online guides for towns ranging from Seymour, Connecticut to Haines, Alaska. He earned a Bachelor of Arts in political science from the University of Massachusetts.

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