S Corporation Tax Tips - How To Begin Preparing Form 1120S

S Corporation Tax Tips - How To Begin Preparing Form 1120S

If your business is an S Corporation, you must file Form 1120S, U.S. Income Tax Return for an S Corporation. The purpose of this article is to help you get started preparing this return. Form 1120S is only four pages, but don't let it's length fool you. If you are going to do this return yourself, you're going to need some help.The Easy Part. You can start by putting the business name and address on the appropriate lines at the top of Page 1. Believe me, after that, things do get a bit more difficult.The Rest of the Top of Page 1. Now notice that there are several information fields to the right and left of the Name/Address section. These fields are labeled with letters from A to I. Each of these fields is important; this article will focus on Items A and B.Item A: S election effective date. This is the date that your corporation first became an S Corporation. After you formed this corporation, you should have filed Form 2553 with the IRS, Election by a Small Business Corporation. Assuming you filed that form correctly, the IRS would have sent you a letter entitled "Notice Of Acceptance As An S-Corporation." In that letter, the IRS would have stated the effective date of your status as an S Corporation. That is the date you want to put in Item A.Here's something important to note: The S Corporation effective date may not be the same as the date of incorporation. Here's why: you might have incorporated your business and initially operated as a regular C Corporation for any number of years, and then made the S Corporation election in a year other than the year of incorporation.But if you incorporated and chose S Corporation status in the same year, then it is likely that your date of incorporation and date of S Corporation election are the same. In either case, be sure to check your records to determine the proper date for Item A.Item B: Business activity code. The IRS has a chart of dozens of business and industry types. This chart can be found in the Form 1120S instructions, pages 39 to 41. You can download these instructions from the IRS website. Look through the codes and find the one that best describes your business and put that 6-digit code in Item B.Having completed these first few fields, you are off to a good start with Form 1120S. Keep it going!

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