What IRS Form 1120-S (2016) Is For

Form 1120-S is the U.S. Income Tax Return for an S Corporation that reports income, gains, losses, deductions, and credits of a domestic corporation that elected S Corporation status by filing Form 2553 (IRS Instructions for Form 1120-S (2016)). Income and losses pass through to shareholders, who report them on their individual tax returns via Schedule K-1.

When You’d Use Form 1120-S for 2016 (Late or Amended Filing)

You’d file a late 2016 Form 1120-S if your corporation failed to file by the March 15, 2017 deadline (or extended deadline). Typical cases include IRS notices for unfiled returns, unreported taxes, or missing K-1 forms. You’d file an amended return if errors need correction. Penalties were $89 per shareholder per month, up to 12 months maximum.

Key Rules Specific to 2016

• S Corporations with shareholder-employees had to pay reasonable compensation subject to payroll taxes.
  
  
• The Accumulated Adjustments Account (AAA) tracked undistributed earnings for distribution purposes.
  
  
• Passive activity loss rules applied at the shareholder level.
  
  
• Penalties under IRC Section 6699 were $89 per shareholder per month, higher than earlier years but lower than today’s penalties.
  
  

Step-by-Step (High Level)

1. Gather transcripts: Obtain account transcripts from the IRS to confirm filings and penalties.
   
   
2. Use correct form: File the official 2016 version only, not current-year forms.
   
   
3. Prepare schedules: Complete Schedule K, K-1s for each shareholder, Schedule M-1, and Schedule M-2.
   
   
4. Attach forms: Include required forms like 1125-A for cost of goods sold if applicable.
   
   
5. File and distribute: Send to the correct IRS center and issue K-1s to shareholders.
   
   
6. Keep copies: Retain full documentation and proof of filing.
   
   

Common Mistakes and How to Avoid Them

• Not paying reasonable compensation to shareholder-employees, triggering IRS reclassification.
  
  
• Errors in AAA tracking, affecting shareholder distributions.
  
  
• Failing to issue K-1s or providing incorrect ones, leading to extra penalties.
  
  
• Misclassifying passive vs. non-passive income, impacting shareholder limits.
  
  
• Using the wrong tax year’s forms.
  
  
• Poor documentation, especially for related-party transactions and shareholder basis.
  
  

What Happens After You File

The IRS usually processes S Corporation returns within 6–8 weeks. Late or amended filings may take longer. Expect penalty notices for missed deadlines. Payments can be made online, by phone, or by mail. If unable to pay, use Form 9465 to request an installment plan. You have appeal rights for penalty disputes or disagreements with IRS determinations.

FAQs

What’s the penalty for filing my 2016 S Corporation return late?

For 2016, the penalty was $89 per shareholder per month, capped at 12 months. A corporation with two shareholders filing six months late would owe $1,068. Penalties are automatic, but you may request abatement by showing reasonable cause such as illness, natural disaster, or professional reliance that prevented timely filing.

Can I still get a refund for my 2016 return?

S Corporations rarely get refunds since they don’t pay entity-level tax. Refund opportunities are limited to overpaid estimated taxes or credits. For 2016, most refund claims expired under the three-year statute, but carryforwards of losses or credits may still apply for shareholders if reported correctly on amended returns.

Do I need to file an amended return if I made an error?

Yes. If errors impact income, deductions, or shareholder K-1 allocations, file an amended Form 1120-S. Check box H(4) on page 1 and attach an explanation of the changes. Issue amended K-1s to affected shareholders, who may need to amend their personal returns. Failure to correct errors may trigger IRS notices.

How do I get transcripts for my unfiled 2016 return?

Request transcripts online at IRS.gov using the “Get Transcript” tool, call 800-908-9946, or submit Form 4506-T. Transcripts provide filing history, account balances, and penalty assessments. Corporate transcripts require proper authorization. Reviewing them before filing ensures you don’t duplicate filings or miss addressing existing IRS records tied to your corporation.

Should I also amend my state S Corporation return?

Most states require amendments when the federal return is corrected. If you amend Form 1120-S, contact your state’s tax authority to check deadlines and filing rules. States often require amended returns within 30–180 days of federal amendments, and failure to comply can result in additional state-level penalties or audits.

What if I can’t pay the penalties owed?

The IRS allows installment agreements through Form 9465 or online applications for balances under $50,000. You can negotiate a monthly payment plan to avoid enforced collection. If circumstances prevented timely filing, you can request penalty abatement for reasonable cause. Supporting documentation improves your chances of reducing assessed penalties.

How long does the IRS have to examine my late-filed 2016 return?

The IRS has three years from the date you file, not the original due date, to audit. This period may extend to six years if you underreport by more than 25% of gross income, or indefinitely if no return is filed. Filing late still starts the statute of limitations clock running.

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