S corporations are corporations that elect to pass corporate income, losses, deductions, and credits 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 at the entity level.
To qualify for S corporation status, the corporation must meet the following requirements:
- Be a domestic corporation
- Have only allowable shareholders
- May be individuals, certain trusts, and estates and
- May not be partnerships, corporations or non-resident alien shareholders
- Have no more than 100 shareholders
- Have only 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 signed by all the shareholders. See the Instructions for Form 2553 PDF for all required information and to determine where to file the form.
Filing requirements:
|
If you are an S corporation then you may be liable for... |
Use Form... |
Separate instructions... |
|---|---|---|
| Income tax | 1120-S | Instructions for Form 1120-S PDF |
|
Instructions for Form 941, Employers QUARTERLY Federal Tax Return PDF Instructions for Form 943, Employers Annual Federal Tax Return for Agricultural Employees PDF Instructions for Form 940, Employers Annual Federal Unemployment (FUTA) Tax Return PDF |
|
| Excise taxes | Refer to the Excise tax webpage |
|
If you are an S corporation shareholder, then you may be liable for... |
Use Form... |
Separate instructions... |
|---|---|---|
| Income tax | 1040 or 1040-SR and Schedule E and other forms referenced on the shareholder's Schedule K-1 | Instructions for Schedule E (Form 1040 and 1040-SR) Supplemental Income and Loss PDF |
| Estimated tax | 1040-ES |
S corporations that are required to file 10 or more returns in a calendar year (calculated by aggregating all returns of any type) are required to e-file their Forms 1120-S, effective for returns required to be filed on or after January 1, 2024. Find details on the final e-file regulations. For more e-file information, see E-file for business and self-employed taxpayers.