Business taxes
Form 1120-S: what the S corp return needs, K-1s, deadlines and a records checklist
Who files IRS Form 1120-S, the March 16, 2026 due date, the $250,000 test for skipping Schedules L, M-1, K-2 and K-3, how Schedule K-1 works, the late-filing penalties and the records to gather first.
Prepared by Aldro Accounting · Updated · Sources checked
The quick answer
Form 1120-S is the IRS return a corporation or other entity files for each tax year it has an accepted S corporation election (Form 2553) in effect. It is due by the 15th day of the 3rd month after the tax year ends, which was March 16, 2026 for calendar-year 2025 returns, and Form 7004 filed by that date gets an automatic extension of time to file. Each shareholder gets a Schedule K-1 showing their share of income, deductions and credits.
Who files Form 1120-S
Form 1120-S reports the income, gains, losses, deductions, credits and other information of a domestic corporation or other entity for any tax year covered by an S corporation election.
A corporation or other entity must file it if it elected S status by filing Form 2553, the IRS accepted the election, and the election remains in effect. The IRS says a corporation should get confirmation of acceptance. If no notice arrives within 2 months of filing Form 2553, the instructions say to follow up by calling 800-829-4933.
Form 1120-S isn't filed for any tax year before the year the election takes effect. Form 2553 must generally be filed no more than 2 months and 15 days after the start of the tax year the election is to take effect.
Once made, the election stays in effect until it ends. It ends automatically if the corporation stops being a small business corporation under section 1361(b), or if for 3 consecutive years it has accumulated earnings and profits and more than 25% of gross receipts from passive investment income. It can be revoked with the consent of shareholders holding more than 50% of the shares.
What the form asks for
The top of page 1 asks for the S election effective date, the business activity code, the EIN, the date incorporated, total assets at year end and the number of people who were shareholders during any part of the year. The instructions say to use the principal office address, not the address of a registered agent in the state of incorporation.
Lines 1a through 5 hold only trade or business income. Rental activity income and portfolio income go on Schedules K and K-1, and rental real estate also goes on Form 8825. Tax-exempt income doesn't go on lines 1a through 5 either.
The deductions section includes compensation of officers, salaries and wages, repairs, bad debts, rents, taxes, interest and depreciation. Form 1125-A supports cost of goods sold. Form 1125-E, Compensation of Officers, is completed only if total receipts are $500,000 or more. Form 4562 supports depreciation.
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| Schedule | What it does | When it can be skipped |
|---|---|---|
| Schedule B | Other information, including question 11 | Not skipped |
| Schedule K | Totals of the shareholders' pro rata share items | Not skipped |
| Schedule K-1 | Each shareholder's share of income, deductions, credits and other items | Not skipped |
| Schedule L | Balance sheet per books | Total receipts and year-end total assets both under $250,000 |
| Schedule M-1 | Reconciles income per books with income per return | Same $250,000 test |
| Schedule M-3 | Net income reconciliation for S corporations with total assets of $10 million or more | Total assets under $10 million |
| Schedules K-2 and K-3 | Items of international tax relevance | Small S corporation or domestic filing exception |
To let each shareholder apply the passive activity rules, the corporation reports income, loss and credits separately for trade or business activities, rental real estate, other rental activities and portfolio income.
The $250,000 test for Schedules L, M-1, K-2 and K-3
Schedule B, question 11, excepts an S corporation from completing Schedules L and M-1 when two conditions are both met: total receipts for the tax year were less than $250,000, and total assets at the end of the year were less than $250,000.
The same two conditions make up the small S corporation filing exception for Schedules K-2 and K-3. Shareholders must get a notice, at the latest when they receive their Schedule K-1, saying they won't receive Schedule K-3 unless they ask for it. A shareholder request by the 1-month date changes that.
Schedule K-2 extends Schedule K and reports items of international tax relevance. Schedule K-3 extends Schedule K-1 and reports each shareholder's share of those items.
A corporation over the $250,000 limits may still meet the domestic filing exception. That needs no foreign activity, or only passive category foreign income with not more than $300 of creditable foreign income taxes, plus the shareholder notice and no K-3 requests by the 1-month date. For calendar-year 2025 S corporations on extension, the latest 1-month date is August 17, 2026.
Schedule K-1: what shareholders get
The corporation uses Schedule K-1 to report each shareholder's share of its income, deductions, credits and other items. The shareholder instructions say to keep it for your records and not file it with your own return unless backup withholding is reported on it.
Shareholders generally use Form 7203, S Corporation Shareholder Stock and Debt Basis Limitations, to figure their stock and debt basis. Basis goes up by all income reported on Schedule K-1, including tax-exempt income.
Each Schedule K-1 that isn't furnished on time, or leaves out required information, can draw a $340 penalty. For intentional disregard it rises to $680 or, if greater, 10% of the items required to be reported.
Due date, extension, e-filing and penalties
An S corporation generally files Form 1120-S by the 15th day of the 3rd month after its tax year ends. For calendar-year 2025 returns the due date was March 16, 2026, because March 15 fell on a Sunday. When a due date falls on a weekend or legal holiday, the next business day counts.
Form 7004 asks for an extension of time to file and is generally filed by the regular due date. Interest is charged on tax paid late even with an extension.
For returns filed on or after January 1, 2024, an S corporation must e-file Form 1120-S if it files 10 or more returns of any type during the calendar year, counting income tax, employment tax, excise tax and information returns. Corporations must use electronic funds transfer for all federal tax deposits.
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| Penalty | Amount |
|---|---|
| Late return, no tax due | $255 per shareholder for each month or part of a month late, up to 12 months |
| Late return, tax due | The amount above plus 5% of unpaid tax per month, up to 25% |
| More than 60 days late, tax due | Minimum of the smaller of the tax due or $525 |
| Late payment | 1/2 of 1% of unpaid tax per month, up to 25% |
| Schedule K-1 late or incomplete | $340 per schedule, $680 or 10% for intentional disregard |
The return is signed by the president, vice president, treasurer, assistant treasurer, chief accounting officer or another authorized corporate officer.
Taxes the S corporation itself can owe
Most S corporation income passes to shareholders, but the instructions list taxes the corporation can owe itself: the tax on built-in gains, the excess net passive income tax and the investment credit recapture tax.
If those taxes total $500 or more, the corporation generally makes estimated tax installments. For a calendar-year corporation, 2026 installments are due April 15, June 15, September 15 and December 15.
Records checklist before you file
These are the items the form and its instructions ask for, so they are the records to have ready.
Records that support income, deductions or credits are usually kept for 3 years from the date each shareholder's return is due or filed, whichever is later. Records showing basis in property are kept as long as they're needed to figure basis, and the IRS says to keep copies of all filed returns.
Aldro prepares and files Form 1120-S and its state returns. Our team handles it for one flat yearly price that covers everything tax, with each shareholder's personal return included when the business income goes on it.
- Form 2553 and the IRS acceptance notice, with the S election effective date
- EIN, date incorporated, principal business address and business activity code
- Income statement split into trade or business, rental and portfolio income
- Cost of goods sold and inventory figures for Form 1125-A
- Officer compensation, and Form 1125-E details if total receipts are $500,000 or more
- Salaries and wages, rents, taxes, interest and other deductions
- Fixed asset and depreciation records for Form 4562
- Year-end balance sheet and total assets, for item F and Schedule L if required
- Shareholder list with everyone who held shares during any part of the year
- Any foreign income or foreign taxes, for Schedules K-2 and K-3
Worked example
A calendar-year S corporation with two shareholders had $180,000 of total receipts in 2025 and $95,000 of total assets at year end. Both are under $250,000, so it answers yes to Schedule B question 11 and skips Schedules L and M-1. It also meets the small S corporation exception for Schedules K-2 and K-3 if it sends the shareholder notice with the K-1s. Now say it owes no tax and files 4 months late with no extension. The late-filing penalty is $255 times 4 months times 2 shareholders = $2,040. If both K-1s were also furnished late, add $340 times 2 = $680, for $2,720 in all.
Common questions
Who has to file Form 1120-S?
A corporation or other entity that filed Form 2553, had the election accepted by the IRS, and still has it in effect. It isn't filed for years before the election takes effect.
When is the S corp tax return due?
By the 15th day of the 3rd month after the tax year ends. For calendar-year 2025 returns that was March 16, 2026. Form 7004, filed by the due date, extends the time to file.
Can an S corporation skip Schedule L and Schedule M-1?
Yes, when total receipts for the year and total assets at year end are both under $250,000. Those same conditions, plus a shareholder notice, also excuse Schedules K-2 and K-3.
What is the penalty for filing Form 1120-S late?
With no tax due, $255 per shareholder for each month or part of a month late, up to 12 months. If tax is due, add 5% of the unpaid tax per month, up to 25%. Each late or incomplete Schedule K-1 can add $340.
Do I have to file Form 1120-S electronically?
For returns filed on or after January 1, 2024, yes if the S corporation files 10 or more returns of any type during the calendar year, including employment and information returns.
How long should an S corporation keep records?
Usually 3 years from the date each shareholder's return is due or filed, whichever is later. Property basis records are kept as long as they're needed to figure basis.
Aldro
The cheapest way to get your business taxes done: $399 flat.
Business tax filing is $399 USD a year, and it covers everything tax for that year.
How it works
- Tell us about your business. A two-minute form. No payment is collected through it.
- Get your next steps by email. We’ll email you the next steps within one business day. After you sign up we’ll send you a secure upload link for your documents.
- We file it. Our team prepares and files your return. Add bookkeeping for $20 a month if you want it.
What's included
$399 a year covers everything tax for that tax year.
- Every business return for the year. All the federal and state or provincial business returns you need for the tax year: Schedule C, 1065, 1120-S, 1120 and their state returns in the US; T2, or T1 with T2125, in Canada.
- More than one state. Multi-state returns are included at the same price.
- Your personal return. The owner’s personal return (1040 or T1) is included when it’s needed for the business income.
- Quebec. Quebec returns (CO-17, TP-1 and TP-80) are included. Our Quebec pages are in French, and our team works with you in English.
- Extensions and reminders. Extensions (Form 7004 or 4868) and quarterly estimate reminders are included.
- Information returns. 1099-NEC, T4/T4A and T5018 slips are included in the tax price.
- City and excise returns. City and local business tax returns, and state excise returns such as Washington B&O, are included in the yearly price.
- Franchise tax reports. State franchise tax reports, such as the Texas franchise tax report, are included.
- Estimated tax and instalment amounts. We work out your quarterly estimated tax payments in the US, or your CRA instalments in Canada, and tell you what to pay and when.
- Unfiled past years. Each unfiled prior-year return is $399 per tax year, the same flat price.
- Bookkeeping at $20 a month. Unlimited bank and card accounts, monthly reconciliation and monthly statements.
Basic inventory tracking for online stores, such as Shopify, is included. Full cost-of-goods reconciliation is quoted separately. Payroll processing and sales-tax filing aren’t included in bookkeeping. Prices are in USD. Our team prepares and files your return.
Sources
- IRS: Instructions for Form 1120-S (2025) · checked October 31, 2026
- IRS: Instructions for Schedules K-2 and K-3 (Form 1120-S) · checked October 31, 2026
- IRS: Shareholder's Instructions for Schedule K-1 (Form 1120-S) (2025) · checked October 31, 2026
- IRS: Form 1120-S e-file test scenario (MeF ATS) · checked October 31, 2026
This guide explains general rules from the sources listed. It isn’t tax advice for your situation.