S Corporations

• Form 1120-S – U.S. Income Tax Return for an S Corporation

• Form 1125-E – Compensation of Officers

• Section 7203 – Limitations on Shareholder Stock and Debt Basis in an S Corporation

Note: The penalties applicable are the same as for Form 1065.

These forms are used by S Corporations (S Corps) to report their income, officer compensation, and shareholder basis limitations:

• Form 1120-S: The main tax return for S Corporations, reporting income, deductions, and credits.

• Form 1125-E: Required if total officer compensation exceeds $500,000, detailing payments to corporate officers.

• Section 7203: Rules that limit a shareholder’s ability to deduct losses based on their stock and debt basis in the S Corp.

Penalties:

• Since S Corps are pass-through entities, the penalties for failing to file are the same as for partnerships (Form 1065):

  • $235 per shareholder, per month (up to 12 months) for late filing.

  • Up to $280 per error for incorrect or incomplete information.

  • Intentional noncompliance – Up to 5 years in prison and fines up to $250,000 for individuals or $500,000 for corporations.