S corporations are corporations that elect to pass corporate income, losses, deductions and credit through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income.
To qualify for S corporation status, the corporation must meet the following requirements:
Be a domestic corporation
Have only allowable shareholders
including individuals, certain trust, and estates and
may not include partnerships, corporations or non-resident alien shareholders
Have no more than 100 shareholders
Have one class of stock
Not be an ineligible corporation i.e. certain financial institutions, insurance companies, and domestic international sales corporations.
In order to become an S corporation, the corporation must submit Form 2553 Election by a Small Business Corporation (PDF) signed by all the shareholders.
|If you are an S corporation then you may be liable for…||Use Form…|
|Income Tax||1120S (PDF) (Instructions for Form 1120S (PDF))
1120S Sch. K-1 (PDF) ( Instructions for Form 1120S Sch. K-1 (PDF))
|Estimated tax||1120-W (PDF) (corporation only) and 8109|
||941 (PDF) ( 943 (PDF) for farm employees)940 (PDF)
|Excise Taxes||Refer to the Excise Tax web page|
Chart 2 – S Corporation Shareholders
|If you are an S corporation
shareholder then you may be liable for…
|Income Tax||1040 and Schedule E (PDF)|
|Estimated tax||1040-ES (PDF)|