The S corporation has a responsibility to file an informational income tax return each year as well as a range of other IRS forms.
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An S corporation is a “pass-through” entity. This means profits and losses from the corporation are reported on the tax returns of individual shareholders. The shareholders are also responsible for paying the tax, rather than the corporation. The S corporation still must file an informational income tax return each year. It also must file a range of other IRS forms. These forms relate to the various other taxes it withholds from the wages it pays to employees.
An S corporation must file its annual tax return by the 15th day of the third month after the tax year ends. This is usually March 15 unless that day is a weekend or holiday. The business must report all financial activity on Form 1120S. They must also attach a Schedule K-1 for each shareholder. These Schedule K-1s report each shareholder’s share of the business’ taxable net income. Shareholders use them to report income on their personal tax returns.
If the S corporation is unable to file by the deadline, it can obtain an extension of time to file by filing IRS Form 7004. The shareholders pay tax on S-Corp income. They face the same deadlines as individual taxpayers. These deadlines, which the IRS sets, is April 15 in most cases.
An S corporation faces a penalty if it fails to file Form 1120S on time. The penalty is at least $220 for each month the return is late, times the number of shareholders (tax year 2023).
If the S corporation pays wages to employees, then the company must withhold federal income tax. They must also withhold Social Security and Medicare taxes from their paychecks. This requires the S corporation to file an IRS Form 941 each quarter. The form reports the total it withholds and must send to the IRS. The form is due four times per year typically on January 31, April 30, July 31 and October 31.
Having employees may also require the S corporation to file an annual Federal Unemployment Tax Return. It is filed each year on Form 940. The corporation must file Form 940 if it pays wages of $1,500 or more in any calendar quarter or has at least one employee working at least part of a day in 20 or more separate weeks. The form reports the wages the S corporation owes unemployment taxes for. The corporation is responsible for sending them to the IRS. The due date for filing Form 940 is Jan. 31 of each year. However, if the corporation pays the entire tax on time, the IRS allows it to file as late as February 10.
S corporations that fail to file Form 1120S by the due date or by the extended due date face a $220 (for 2023) penalty for each month or part of a month the return is late. The penalty is multiplied by the number of shareholders. If the corporation files Form 941 late with an unpaid tax balance, it faces a 5 percent penalty. This penalty applies each month or partial month the tax is late, up to 25 percent max. Similar penalties apply to filing Form 940 after the due date as well.
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With TurboTax Live Business, get unlimited expert help while you do your taxes, or let a tax expert file completely for you, start to finish. Get direct access to small business tax experts who are up to date with the latest federal, state and local taxes. Small business owners get access to unlimited, year-round advice and answers at no extra cost, maximize credits and deductions, and a 100% Accurate, Expert Approved guarantee.
