The S-Corp Tax Forms 101
Being the owner of an S-Corporation comes with its own set of responsibilities. One of these responsibilities will be filing annual forms on behalf of the company. These various forms will provide information about the corporation, its employees, and its shareholders. Some of the basic forms that all S-Corporations need to file include the W-2, 1099-NEC, 1120-S, K-1, and the annual report.
The W-2 Wage and Tax Statement
The W-2 Wage and Tax Statement is an annual form that the company will prepare and provide to each employee. It shows the wages paid and the taxes withheld for the year for each employee. Reported taxes include federal withholdings, and Social Security and Medicare withholdings. Employers must provide W-2’s to employees and to the Social Security Administration (SSA) by January 31st of the following year.
Employer will use the W-2, to report employee benefits using Box 12. Some of these benefits include contributions to employer-sponsored retirement plans, company-provided health insurance, HSA contributions, life insurance premiums, and cafeteria plans. Box 14 shows additional information such as employee deductions for union dues, worker’s compensation, or state-paid family medical leave.
Employers, or payroll providers, will prepare several different copies of the W-2 form. Each copy serves a different purpose. The Social Security Administration receives Copy A. Copy 1 goes to the state, city, or local tax department. Employees will attach Copy B to their personal federal tax return and will keep Copy C for their records. The employee sends Copy 2 with any personal state, city, or local tax return. Finally, employers will keep Copy D for their records.
Along with Copy A of the W-2, employers will also prepare and submit Form W-3, Transmittal of Wage and Tax Statements, to the SSA. The W-3 reconciles the total amounts reported on the W-2’s every year. Employers should also keep a copy with the year’s W-2 forms.
The 1099-NEC Nonemployee Compensation
In addition to reporting wages and tax withholdings, S-Corporations may need to issue the 1099-NEC Nonemployee Compensation Form. This form reports any payments over $600 to independent contractors for providing services performed for business purposes. The 1099-NEC must be sent to recipients by January 31st. Paper copies must be provided to the IRS by March 1st, or March 31st for electronically transmitted documents.
Like the W-2, Form 1099-NEC has several different copies. Copy 1 is sent to the State tax department. The recipient receives Copy B. If the recipient files an individual state tax return, they will attach Copy 2 with the filing. Employers will keep Copy C, along with a copy of the Form 1096, Annual Summary, and Transmittal of U.S. Information Returns. Form 1096 is also sent to the IRS along with Copy A.
The 1120-S U.S. Income Tax Return for an S Corporation
S-Corporations are pass-through entities. The profits or losses of the company are passed through to the individual shareholders. Shareholders will report their share of the profits or losses on their individual tax returns.
In most situations, an S-Corporation will not pay tax at the corporate level. However, the company is still required to file an annual tax return with the IRS, the 1120-S Income Tax Return for an S Corporation. The tax return is due the 15th day of the third month following the end of the tax year or March 15th for calendar filers.
The 1120-S reports the total income, gains, losses, deductions, and credits of the corporation on the first page of the return:
- On the first page there is information about the company, such as the name, address, NAICS code, and EIN.
- Schedule B, on page two and three of the return, reports other information. This includes the accounting method, constructive ownership of other entities, and reporting of any shares of restricted stock. S-Corporations will use Schedule B to answer specific questions about additional filing requirements, such as Form 8918 or Form 8218.
Pages three and four of the return include the Schedule K Shareholders’ Pro Rata Share Items. Individual Schedule K-1’s, Shareholder’s Share of Income, Deductions, Credits, etc. are prepared using this information.
- The fourth page of the return includes Schedule L Balance Sheet per Books. A corporation’s balance sheet should agree with the annual tax return. Corporations with less than $250,000 in both gross receipts and total assets are not required to complete Schedule L.
- The fifth page of the 1120-S includes Schedule M-1 Reconciliation of Income (Loss) per Books With Income (Loss) per Return and Schedule M-2 Analysis of Accumulated Adjustments Account, Shareholders’ Undistributed Taxable Income Previously Taxed, Accumulated Earnings and Profits, and Other Adjustments Account. Corporations with less than $250,000 in both gross receipts and total assets are not required to file Schedule M-1. For corporations with total assets of more than $10 million a Schedule M-3 is filed rather than the M-1.
The K-1 Shareholder’s Share of Income, Deductions, Credits, etc.
The corporation provides each shareholder of the company with a Schedule K-1. The IRS must also receive a copy. Schedule K-1’s must be provided by March 15th, or September 15th for a company that has submitted a Form 7004, request for an extension of time to file.
The individual shareholder will use the Schedule K-1 to report their share of the company’s income, deductions, and credits on the personal tax return. A Schedule K-1 will also note the shareholder’s number of shares owned and any loan balance at the beginning and end of the year. This information is helpful when calculating individual shareholder basis in the company.
The Annual Report
Annual reports are generally required in the state of formation. They are often filed with the Secretary of State. Many states allow online submission of the report. Each state has different filing requirements for the annual report, but the required information is basically the same. Reported information includes the name of the business, the state of formation, and the business mailing address and physical address, if different. A list of officers and directors, a description of business activities conducted in the state during the year, and the registered agent’s name and address are also generally required.
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