Federal 1120S Form Help
The following information has been provided to assist in the preparation of income tax returns for domestic corporations or any other entity covered by an election to be an S corporation.
After completion of the Financial Statements, much of this form will be completed. Review the data that flows to it and use the information provided to guide in the completion of the return. The effective date of the S election and the number of shareholders must be provided.
Income and loss amounts will flow from the Income Statement and the listed forms. Form 1125-A will complete based on amounts entered on the Income Statement and Balance Sheet, but Form 4797 and the income received from pass through entities, via K-1(1041) and K-1 (1065), must be manually completed. Adjustments related to income and loss passed through may be required even when K-1(1041) and K-1(1065) are used; review the data for accuracy. A worksheet for entering other income or loss is provided.
Deduction amounts will flow from the Income Statement and the listed forms. Form 4562, via the Asset Worksheet, and deductions received from pass through entities, via K-1(1041) and K-1 (1065), must be manually completed. Adjustments related to deductions passed through may be required even when K-1(1041) and K-1(1065) are used; review the data for accuracy. A worksheet for entering other deductions is provided.
A worksheet is available to figure any applicable Excess Net Passive Income tax. The tax on built in gains will flow from the applicable worksheet on Schedule D.
Payments made on behalf of the S corporation will flow from the Estimated Tax Payments worksheet available on the Income Statement. Any fuel tax credit figured on Form 4136 will also flow to this section. If applicable, a penalty for underpayment of estimated tax will be included in this section as well.
Each applicable question on Schedule B should be answered for the S corporation. Information pertaining to accounting method, business activity, and principal product or services will automatically flow from the Client Data Screen. The question pertaining to the requirement to file Schedules L and M-1 will calculate based on information in the return. To force these schedules to complete when not otherwise required, check the box that indicates you wish to voluntarily complete them.
Amounts will flow from the Income Statement and the listed forms. Adjustments related to amounts passed through may be required even when K-1(1041) and K-1(1065) are used; review the data for accuracy.
Income (Loss)
Form 8825 will complete based on amounts entered on the Income Statement and Balance Sheet, though additional entry of descriptive information will still be required. Form 4797 and Form 1120S Schedule D, via Form 8949, must be manually completed. A worksheet for other income is provided.
Deductions
Section 179 deduction will calculate from Form 4562. Investment interest expense and Section 59(e)(2) expenditures will flow from the Income Statement. All charitable contributions must be classified on the provided worksheet. A worksheet for other deductions is provided; note that items P and Q/R are mutually exclusive so any amount entered for P will clear amounts flowing from Form 8903 for Q and R.
Credits
Amounts from supported credit forms will flow to this section as appropriate. Amounts entered on the 42(j)(5) section for the Low-Income Housing credit will reduce the amounts flowing to the “other” field from Form 8586. A detailed worksheet for other credits is also provided.
Foreign Transactions
Use the worksheet provided to enter foreign transaction information; the form lines will populate based on the worksheet. Information for five country codes is supported.
Alternative Minimum Tax Items
The depreciation adjustment and adjusted gain and loss are calculated from Form 4562 and the Asset Worksheet. Depletion other than oil or gas flows from the Income Statement. Amounts for oil, gas, and geothermal properties must be manually entered. A worksheet is provided for reporting other AMT items.
Items Affecting Shareholder Basis
Tax exempt interest income, other tax exempt income, and nondeductible expenses will flow from the Income Statement. Distribution amounts and repayments of loans from shareholders will flow from Schedule K-1 for the shareholders.
Other Information
Investment income and expenses must be manually entered. A detailed worksheet for other items and amounts is provided.
Schedule L will complete with the data provided in the Balance Sheet in the Financial Statements if the requirements for filing are met, or if the election to voluntarily report is made on the Client Data screen or Schedule B. Note that some states require completion of Schedule L in all cases.
Schedule M-1 will complete based on data in the Financial Statements and elsewhere on the return if the requirements for filing are met, or if the election to voluntarily report is made on the Client Data screen or Schedule B. If Schedule M-3 is required or an election to file has been made, all data will clear from this schedule. The majority of the reconciliation will be completed, but use the worksheets provided for income and expenses recorded on books but not on Schedule K and income and expenses recorded on Schedule K but not on books to make any necessary adjustments. Adjustments for income and expenses received from a pass through entity will most likely be required.
Form 1120S filers with more than $10 million in assets but fewer than $50 million in assets can elect to file Part I of Schedule M-3 (Form 1120S) and reconcile book income to tax income on Schedule M-1. Those eligible filers should mark the appropriate box at the top of Schedule M-3, and Schedule M-1 will complete as described above.
Data for the Accumulated Adjustments Account will complete based on data in the Financial Statements and from Schedule K-1. Worksheets for reporting other increases and other decreases are provided. Data for the Other Adjustments Account and Shareholders’ Undistributed Taxable Income Previously Taxed must be directly entered.
Schedule B-1 will automatically load and complete if any shareholder is a nominee, estate, trust, or disregarded entity. Selecting one of these values on Schedule K-1 (Form 1120S) for the “Type of entity” field will transfer that owner’s data to Schedule B-1 and will calculate Form 1120S, Schedule B, question 3 to “Yes”.
Complete Form 8949 for dispositions of capital assets. Short term transactions will flow to Part I; long term transactions will flow to Part II. Figure the tax on built-in gains in Part III.
Any short term capital gain from Form 6252 or short term gain or loss from Form 8824 will flow to the appropriate line. Any tax on built in gains attributable to sales listed in Part I should be entered to reduce net short term capital gain or loss. The total net short term gain or loss will be reported on Schedule K of Form 1120S.
Any long term capital gain from Form 6252 or long term gain or loss from Form 8824 will flow to the appropriate line. Any tax on built in gains attributable to sales listed in Part II should be entered to reduce net long term capital gain or loss. The total net long term gain or loss will be reported on Schedule K of Form 1120S.
If the S corporation is subject to the tax on built-in gains, complete the worksheets to determine the excess of recognized gain over recognized losses and taxable income. The tax after Section 1374(b)(2) deduction and credits/carryforwards will flow to Form 1120S
Use Schedule K-1 (Form 1120S) to report the Shareholders’ Share of Income, Deductions, Credits, etc.
Complete the information about the shareholder by entering either an EIN (or APPLD FOR or FOREIGNUS, if applicable) and business name OR an SSN and shareholder’s first and last name. Provide the shareholder’s address by selecting either Domestic Address or Foreign Address and completing the appropriate lines.
Enter the shareholder’s percentage of stock ownership directly, or link to the attached worksheet to determine the weighted average percentage of stock ownership if a change in stock ownership occurred during the year.
Check the box indicating the shareholder should receive amounts left over due to rounding if applicable. This box should only be checked on one Schedule K-1 in the return.
A basis worksheet will complete for each shareholder by default, showing both stock basis and loan basis. Any contributions to or distributions from the S corporation should be reported on this worksheet. The shareholder’s basis in loans made to the S corporation, as well as loan repayments received from the S corporation should also be reported on this worksheet. Distributions and loan repayments will both total to Schedule K on Form 1120S.
The type of entity is not required on Schedule K-1 for federal purposes, but should be provided in order to automatically complete Schedule B-1 (Form 1120S). In addition, this information is frequently used on state returns. Select the applicable type of owner to ensure correct data flow to Schedule B-1 and correct state treatment of the shareholder.
Net rental real estate income (loss)
A worksheet is attached to this field showing the address, type, and income or loss received from each rental property reported on Form 8825.
Items affecting shareholder basis
Codes A, B, and C will flow from Schedule K on Form 1120S. Codes D and E are calculated from the basis worksheet described under “Shareholder Information”.
Other information
All information will flow from Schedule K on Form 1120S. A statement will automatically attach for Code K, Dispositions of Property With Section 179 Deductions, showing information about each asset disposed of for which a Section 179 deduction has been taken.
Use Schedule M-3 (Form 1120S) to show the reconciliation of income per books and records to income reported on the S corporation’s tax return. Note that use of Schedule M-3 will clear all entries recorded on Schedule M-1 of Form 1120S, except as noted below. Certain S corporations are required to file all or part of Schedule M-3, but any S corporation not otherwise required to file it may do so voluntarily.
Form 1120S filers with more than $10 million in assets but fewer than $50 million in assets can elect to file Part I of Schedule M-3 and reconcile book income to tax income on Schedule M-1 of Form 1120S. Those eligible filers should mark the appropriate box at the top of Schedule M-3, and Schedule M-1 will complete normally.
Answer the applicable questions in Part I. The income statement period will calculate automatically based on data entered on the Client Data Screen, but can be adjusted if necessary. Worldwide consolidated net income or loss will flow from the Income Statement. Worksheets are available to provide details for each type of net income or loss, as well as the assets and liabilities for each applicable entity that should be adjusted in Part I.
Income (Loss) Items
Items that directly correspond to fields on the Income Statement will flow to Column (a). Worksheets are available for several lines in this section of the form. For income items relating to Interest Income and Cost of Goods Sold, link to Form 8916-A from the applicable lines on Schedule M-3. Reconciliation totals must agree with the net income per books reported in Part I for Column (a) and with the reconciliation shown on Schedule K, Form 1120S for Column (d).
Expense/Deduction Items
Items that directly correspond to fields on the Income Statement will flow to Column (a). Worksheets are available for Section 118 exclusion information and Other Expense/Deduction Items With Differences. For expense items relating to Interest Expense, link to Form 8916-A from the applicable line on Schedule M-3. Total expense/deduction items will flow to the reconciliation totals listed at the bottom of the Income/Loss Items section.
Complete Form 2553 to elect Subchapter S status for an eligible corporation. If the corporation meets the reasonable cause requirements for late election relief, Form 2553 can be submitted as an attachment to Form 1120S. For electronic filing, the signed Form 2553 can be scanned and attached as a PDF to the submission via the Document Archive.
List each shareholder’s name, address, percentage of stock ownership, date of acquisition, ID number, and tax year end. See the form instructions for special rules about who must sign.
Complete Form 8869 to treat an eligible subsidiary of the S corporation as a qualified Subchapter S subsidiary (QSub). See the form instructions for details about subsidiary eligibility.
Part I will complete automatically with the S corporation information from the Client Data Screen.
Part II should be completed in its entirety for the eligible subsidiary.
Form 8879-S is the declaration document and signature authorization for an e-filed return filed by an electronic return originator (ERO). This form is retained by the ERO and is not mailed to the IRS.
If a “Default EFIN” is entered in Office Setup, the EFIN/DCN and ERO Part III will be auto populated. If no “Default EFIN” is entered, then nothing is auto populated. Without a “Default EFIN”, by entering an ERO/EFIN at the bottom of Form 8879-S, Part III will populate with information in the ERO database. Even if these fields are auto populated, you can still change the information by selecting a different ERO/Preparer.
Part I will complete automatically with the applicable information from Form 1120S, Schedule K. If the return has a balance due, complete the Direct Debit Account Information for electronic payment scheduling.
If bank information has been entered on the Client Data Screen, CrossLink will automatically transfer the information to Form 8879-S for direct debit. Different bank information can be entered directly in this section if necessary. If direct debit is not desired, uncheck the box authorizing withdrawal of funds and all direct debit information will clear. If electing direct debit, a bank RTN, account number, account type, payment amount, withdrawal date, and taxpayer phone must all be provided.
A PIN and authorization code must be entered in this section for the signing officer. When a PIN is entered, the date of signature will automatically calculate.