CPA for S corporation tax returns (Form 1120-S)

Form 1120-S reports the S corporation’s income, deductions and credits for the year. The company generally does not pay federal income tax itself. Each shareholder’s share flows through on a Schedule K-1 and is reported on that shareholder’s individual return.

Because shareholders need their K-1s to file, a late or changing 1120-S holds up every owner’s personal return. We work on the company return first so owners have their K-1s with time to spare.

• Original due date: the 15th day of the 3rd month after year end. For calendar-year 2026, that is March 15, 2027.
• Extension: Form 7004, filed by the original due date, gives an automatic 6-month extension, to September 15 for a calendar-year company.
• Late filing penalty: a set amount for each month or part of a month the return is late, up to 12 months, multiplied by the number of shareholders. The amount is $255 per shareholder per month for returns due in 2026 and $260 for returns due in 2027.

Not sure when your S election took effect? Use our S corp election deadline tool.

Reasonable compensation. Shareholders who work in the business are expected to receive reasonable W-2 wages for their services before taking non-wage distributions. If wages are too low, the IRS can reclassify distributions as wages and assess employment taxes. We look at the services each owner performs and review the salary with you before year end.

2% shareholder health insurance. When the S corporation pays health insurance premiums for a 2% shareholder-employee, the premiums are deductible by the company and reported as wages in Box 1 of the shareholder’s W-2. When the plan covers all employees or a class of employees, those wages are not subject to Social Security, Medicare or FUTA tax. The shareholder may then be able to take an above-the-line deduction. Getting this right depends on payroll being set up correctly before the last payroll of the year.

A shareholder can deduct losses and receive tax-free distributions only up to their stock and debt basis. Shareholders use Form 7203 to figure those limits. We keep a running basis schedule for each shareholder from year to year, so losses, distributions and loans are tracked the same way every time.

• District of Columbia: DC treats S corporations as C corporations. An S corporation doing business in DC files Form D-20 and pays the corporation franchise tax. See DC business franchise taxes.
• Virginia: pass-through entities file Form 502, due April 15 for a calendar-year entity, with an automatic 6-month filing extension. The entity can also elect the Virginia pass-through entity tax.
• Maryland: S corporations file Form 510, due the 15th day of the 4th month after year end. An entity electing the Maryland pass-through entity tax files Form 511.

We start with your books, payroll reports and prior returns, review owner wages, health insurance and basis, and prepare the federal and state returns together. You get a clear list of what we need, a draft to review and K-1s for each owner. Our fees are transparent and fair, quoted upfront, in writing.