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S Corporation Taxes PAGE 5 Corporate Forms While C corps file Form 1120, S corps file Form 1120-S (the "S" is for S corp). Form 1120-S is usually only informational in nature, and no tax is usually due with the filing. To record the flow of income to the shareholders, two other forms are filed. Schedule K, Shareholder's Share of Income, Credits, Deductions, and Schedule K-1, Shareholder's Share of Income, Credits, Deductions. (Yes, I know they have the same name, but the K-1 is shareholder specific taking into consideration the shareholder's percentage ownership of the S corporation. Also be sure to get the Schedule K-1 for Form 1120-S and not the K-1 for partnerships, which is a different form entirely.) Schedule K-1 is given to each shareholder and helps you prepare your individual income tax return. Ultimately, when doing personal taxes, using the information on the K-1, you'll fill out Schedule E of your personal 1040 income tax return, and report the net income or loss from your S corporation on line 17 of your personal 1040. The 1120-S, K, and K-1 are the foundation forms of an S corporation, and they'll become your close friends. Because S corp dividends flow to you, you'll want to be sure to become familiar with Form 1040-ES, the individual, estimated tax payments form. (Don't confuse this form with Schedule SE to the 1040. They're totally unrelated.) The U.S. Income Tax System is a pay-as-you-earn system. So in general, you can't have a huge tax bill payable at the end of the year, if you earned a big part of that money earlier in the year. Whenever you're introduced to a new federal tax form, ask yourself if there's a corresponding state tax form. For example, your state probably requires an annual reporting on a state version of Form 1120-S. Your state government is your best source of information here. Incidentally, if you look under "Deductions" on Form 1120-S, you'll see line 8 is for "salary and wages." This prevents wages paid to yourself and others from flowing through as "ordinary income." In other words, wages paid to yourself reduce corporate profits. This is true for a C corporation also. So, if your company "earns" $50,000 before paying any salary to you, you can effectively decide how much of the $50,000 to allocate to corporate profits and how much to allocate to your own wages. This allocation has significant tax consequences for both C and S corporations. Occasionally, you'll hear the phrase, "income splitting," when discussing this allocation. continued Page 1 - 2 - 3 - 4 - 5 - 6 Enter your search terms Submit search form       Search Idea Cafe Web Small Business Tax Center • Idea Cafe Home • Sign Up • Biz Grant Center • CyberSchmooz •Coffee Talk with Experts • People in Biz Profiles • Starting Your Biz • Biz Planning • Running Your Biz • FREE Trade Publications • Marketing • Financing Your Biz • Human Resources • Legal & Biz Forms • Managing Your Biz • eCommerce • You and Your Biz • Gen X • Work@Home • The Fridge • De-Stress • Send an Award • Send an eGreeting • Yoga @ Your Desk • Web Guide • Idea Cafe in the News • About Idea Cafe • Advertise on Idea Cafe • Contact Us • Privacy Policy • Site Map • Small Biz News Copyright 1995-2024, Idea Cafe Inc. Downloads are for personal use only, not for resale to others, and may not be reprinted in any form without written permission from Idea Cafe Inc. DISCLAIMER: We hope whatever you find on this site is helpful, but be cautioned that it may not apply to your own situation, or be totally current at any given time. Idea Cafe Inc. and all of its current and past experts, sponsors, advertisers, agents, contractors and advisors disclaim all warranties with regard to anything found anywhere on this family of websites, quoted from, or sent from Idea Cafe. and its related sites, publications and companies. We also take no responsibility for comments published by others on these pages. TRADEMARKS: The following are Registered Trademarks or Servicemarks of DevStart, Inc.: Idea Cafe®, Online Coffee Break®, The Small Business Gathering Place®, Take out Info®, Biz Bar & Grill®, Complaint-O-Meter®, A Fun Approach to Serious Business™, CyberSchmooz™, and BizCafe™.

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