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What is an 1120-S tax return?

What Is Form 1120-S?

Form 1120-S is an Internal Revenue Service form that S Corporations use to report the company’s financial activity for each tax year. Some of the financial activity reported on this form include:

• Gains
• Losses
• Deductions
• Credits

Corporations only use this form if the company has already filed IRS Form 2553 and the IRS has approved S Corp election for the company.

S Corps are pass-through entities, so they are exempt from paying federal income taxes. Instead, shareholders report the corporation’s profits on their personal income tax return.

Even though S Corps aren’t subjected to corporate taxes, Form 1120-S is still essential because it is filed with an attached Schedule K-1 which reports what percentage of the corporation is owned by each shareholder to the IRS.

The Schedule K-1 form allows the IRS to determine what taxes each business owner must pay or be refunded on their personal tax return. Without an accurate 1120-S and Schedule K-1, the S Corporation and shareholders may not receive certain tax benefits.

What Is a 1120 Tax Form?

A 1120 tax form is an Internal Revenue Service (IRS) form that corporations use to find out their tax liability, or how much business tax they owe.

It is also called the U.S. Corporation Income Tax Return. American corporations use this form to report to the IRS their income, gains, losses deductions and credits.

There are special forms for specific types of organizations. They include:

• 1120-C: cooperative associations, such as farmers’ cooperatives
• 1120-F: foreign corporations
• 1120-H: condominium management, residential real estate management, timeshare association that elects to be treated as a homeowners association
• 1120-L: life insurance companies
• 1120-POL: political organizations
• 1120-S: S corporations

Who Files Tax Form 1120?

All domestic corporations must file tax form 1120, even if they don’t have taxable income. Corporations exempt under section 501 do not need to file tax Form 1120. Corporations in bankruptcy must also file Form 1120.

The following entities must file tax Form 1120:

• Businesses that have chosen to be taxed as corporations. These businesses must also file Form 8832 and attach a copy of it to form 1120.
• Limited liability companies (LLCs). LLCs only file Form 1120 if they’ve elected to be taxed as a corporation. Partnership LLCs file Form 1065 instead and single-member LLCs usually file their taxes via the owner’s personal federal tax return.
• Farming corporations. They must file Form 1120 to report their income or losses.
• Corporations with ownership interest in a FASIT. A FASIT is a Financial Asset Securitization Investment Trust.
• Foreign-owned domestic disregarded entities. If a foreign person or corporation owns 100 percent a domestic disregarded entity (DE), then the domestic DE is treated as separate from its foreign owner. A DE is a business the IRS doesn’t consider separate from its owner. Yes, these two things contradict each other but this is how it works. The foreign person or corporation must file Form 1120 and attach Form 5472.

There are also additional documents, or schedules, some types of corporations have to fill out as well. They include Form 1120 (Schedule N) for foreign operations of U.S. corporations and Form 1120 (Schedule D) for capital gains and losses.

What is Form 1065: US Return of Partnership Income?

Tax Form 1065, also known as a “Partnership Tax Return,” is how businesses classified as partnerships report their financial information to the IRS. Partnerships are “pass-through” entities and don’t have their own tax rate. What this means is that their profits and losses pass through directly to their owners. Generally, no taxes get paid with Form 1065 because this is an informational return. Multi-member LLC’s that are classified as a partnership and not an S-Corp must file Form 1065.

Who Must File Form 1065?

The IRS defines a partnership as two or more people who carry on a trade or business together. Each person contributes money, skill, labor, or property with the expectation that all partners will share in the profits and losses.

All domestic business partnerships must file Form 1065. This includes multi-member limited liability company’s (LLCs) and possibly husband-and-wife owned businesses (although, there are different options for husband-and-wife- owned businesses in community property states).

Foreign partnerships with income in the US must also file Form 1065. Foreign partnerships are excluded from filing if the partnership meets any of the following conditions during its tax year:

·   The partnership had no effectively connected income (ECI).

·   The partnership had US earnings of $20,000 or less.

·   Less than 1% of any partnership item of income, gain, loss, deduction or credit was allocable in the aggregate to direct US partners.

·   The partnership had no US partners at any time.

Nonprofit religious organizations exempt from tax under section 501(d) also file this form. They must show that profits were given to their members as dividends, regardless of if the dividends were actually distributed. These religious or apostolic organizations must also make their information return available for public inspection, which includes an exact copy of Form 1065 and all accompanying schedules and attached statements, except K-1.