Form 1120-S (Schedule M-3) and Form 1120: Basics
Form 1120-S: U.S. Income Tax Return for an S Corporation Definition
A shareholder is any individual who owned at least 10 percent (10%) of the voting stock of an S corporation at any time during the year. A shareholder need not own stock in the S corporation to be a shareholder. However, an S corporation shareholder generally must own the majority of the corporation's assets to be an S corporation shareholder. The shareholder must be an individual, estate, trust, partnership, foreign corporation, estate of certain decedents, certain estates and trusts, or an estate or trust that has acquired 100 percent of the shareholder's interest. For more information on what constitutes an S corporation shareholder, consult Publication 590-B, General Instructions for Certain Information Returns. This publication provides further information on Form 1120-S and related IRS instructions. Certain estate trustees are permitted to use Form 1120-S to report the taxable income of an estate or trust, but the annual Form 1120-S reporting requirements only apply to estates or trusts formed or treated as a partnership for estate or gift tax purposes, or that are treated as a partnership for federal income tax purposes. Also, certain estate trustees must use the Form 1043-S to file an amended return for the estate or trust. All the instructions provided to an estate trustee are the same for Forms 1120-S and 1043-S. When filing Form 1120-S, taxpayers must enter each item of income, loss, deduction, credit, exemption, or credit from Schedule C or Schedule F and the applicable box in box 13 of Form 4562. In addition, if there is a net capital gain on the sale of S corporation stock, a taxpayer must enter the net capital gain in box 3 of Schedule C or Schedule F, or enter the net capital gain in boxes 1 and 12 of Schedule F depending on whether the stock is held in another person's account or in an account controlled by the taxpayer. If an S corporation owned property at any time in the year and the property is disposed of within the same taxable year, enter the number of days that pass between the date the taxpayer acquires the property and the date the property is disposed of on each Form 1120-S filed in the taxable year that includes that time. See Instructions for Forms 1120-S, 3.02. If an S corporation is a partnership and is a partnership for income tax purposes, it must include all the information included in box 6 of Part I of Form 1120-S. Each partner must then complete Schedule E after Form
Form 1120-S: U.S. Income Tax Return for an S Corporation Definition
This form is sent to the Internal Revenue Service (IRS). These schedules can be used to: determine whether there is an election to include S corporation share of income by shareholders of the corporation, and Determine how dividends of the corporation and its shareholders are treated. If an S corporation is treated as a partnership for federal income tax purposes, Form 1120-S also requires information about the partnership's income, deductions, and credits. This information should be listed on Part III. If an S corporation is a personal service corporation (PSC) for federal income tax purposes, Form 1120-S also requires information about the corporation's income, deductions, and credits. This information should be listed on Part III. What if the information on the Schedule A is incorrect? If your Schedule A doesn't give the correct information, we will apply the following adjustments and provide notice of your corrections. If the corrected information doesn't affect the corporation's income tax, we'll include it in the return. If the amended information affects the corporation's federal tax liability, we'll apply either of the following: a) the modified adjusted gross income of the corporation, or b) the corporation's income amount on the Form 1120. If either of the adjustments above applies, no notice should be sent. Corrected return with income amount in effect Before we send a corrected return you must receive the following information. The following information must be found on the corrected return: Your corrected income tax return. Your corrected Form 1120-S. This item lists any adjustments that affect your income tax. You must have your corrected Form 1120-S if you haven't received it yet. The date the schedule is due. Any return received after that date but before the due date of the amended return may not be accepted. Corrected schedule Schedule A Corrected return without income amount on Form 1120-S Form 1120-S may be filed by completing the Form 1120. If a return is missing some or all of the information required on the form, or it's incorrect because of a typographical error, we may not fill the entire form. Therefore, our procedures for completing Schedule A depend on the return missing some or all of the required information. If we find that the return is missing any of the information on Schedule A, we won't make any of the adjustments listed on this form, even if the additional information required is on the
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