Form 1120S (2012) Filing Checklist
2012 Form Uniqueness
Form 1120S 2012 uniquely emphasizes electronic deposit requirements for all tax payments, introduces expanded Schedule B questions, and eliminates separate payment card reporting—reflecting post-recession administrative streamlining while maintaining pass-through entity income allocation to shareholders.
Year-Specific Programs Applying to 2012 Form 1120S
The 50% special depreciation allowance applies to qualified property acquired after December 31, 2007, and placed in service during 2012. The maximum Section 179 deduction for 2012 property is $500,000, reduced by amounts exceeding $2,000,000 in total placed-in-service property cost; for qualified enterprise zone property, the limit is $535,000. The 100% special depreciation allowance for certain long-production-period and aircraft property expired and does not apply to property placed in service after December 31, 2012.
10-Step Compliance Checklist
Step 1: Verify S Corporation Election and Authority
Confirm Form 2553 (election to be treated as an S corporation) was filed and accepted by the IRS before filing Form 1120S. If the election was revoked or terminated, document the termination date and reason on a statement attached to the final Form 1120S year.
Step 2: Confirm Calendar or Approved Tax Year
Verify the corporation uses a calendar year (December 31) or has a valid election under Section 444 for an alternative tax year. S corporations must use one of four approved tax year methods; document any deviation and file Form 2553 or Form 1128 if a change is needed.
Step 3: Gather and Reconcile Income Documents
Collect all 1099s (interest, dividends, royalties, capital gains), rental property documentation, Section 1231 property records, and ordinary business income calculations. If the corporation reports more than one trade or business, separately document income and deductions for each activity to provide accurate passive activity information to shareholders.
Step 4: Calculate and Report Depreciation and Section 179 Deductions
Do not deduct Section 179 depreciation on page 1, line 15; instead, pass it through to shareholders in Schedule K-1, box 11. Maximum Section 179 deduction for property placed in service in 2012 is $500,000 ($535,000 for qualified enterprise zone property), reduced dollar-for-dollar by property cost exceeding $2,000,000. For passenger automobiles (non-truck/van), maximum total depreciation is $3,160; for trucks and vans, maximum is $3,360 provided the special depreciation allowance does not apply.
Step 5: Calculate Officer Compensation and Verify Reasonableness
On Form 1120S, page 1, line 7, report total compensation paid to all officers (including non-shareholders). For officer-shareholders providing more than minor services, ensure compensation is reasonable and supported by documentation comparing similar positions in the same industry; distributions in excess of reasonable compensation may be recharacterized as wages subject to payroll tax.
Step 6: Assemble Required Schedules and Attachments
Attach schedules in this order: Schedule N (foreign operations), Form 8825 (rental real estate), Form 8050, Form 1125-A (cost of goods sold), Form 4136, Form 8941, Form 5884-B, then additional schedules alphabetically and forms numerically. Corporations with total assets of $10,000,000 or more must use Schedule M-3 instead of Schedule M-1. Ensure that all applicable spaces are completed and avoid using “See Attached” or “Available Upon Request” in entry spaces; attach separate sheets only for supporting detail.
Step 7: Account for Excess Net Passive Income and Built-In Gains
If the corporation has accumulated C corporation earnings and profits (E&P) and passive investment income exceeds 25% of gross receipts, calculate excess net passive income tax on line 22a. If the corporation converted from C to S status and has net unrealized built-in gain, calculate built-in gains tax on Schedule D, Part III. If passive income exceeds 25% of gross receipts for three consecutive tax years, the S election terminates on the first day of the fourth year.
Step 8: Complete Schedule K and Schedule K-1 by Shareholder Allocation
Report all income, deductions, credits, and other items on consolidated Schedule K, then allocate each item to individual shareholders on their respective Schedule K-1 forms using the per-share-per-day method or the closing-of-books method consistently applied. Furnish each shareholder with a completed Schedule K-1 and maintain a copy in the corporation's file. Failure to furnish Schedule K-1 timely or with correct information incurs a $100 penalty per Schedule K-1.
Step 9: Calculate and Pay Estimated Income Tax Installments
If the total estimated tax for built-in gains, excess net passive income, and investment credit recapture exceeds $500, make four equal installment payments due April 15, June 17, September 16, and December 16, 2012 (for calendar year corporations). Use Electronic Funds Transfer (EFTPS) or an approved payment processor for all deposits; paper checks are not accepted.
Step 10: Sign, Verify Assembly, and Prepare for Filing
The officer (president, vice president, treasurer, assistant treasurer, or chief accounting officer) must sign and date the return. If tax is due, it must be paid in full by March 15, 2013 (calendar year deadline). File a complete Form 1120S, including all required schedules and attachments, following the 2012 Where to File instructions that correspond to the corporation’s principal office location. Verify total assets reported on Schedule L, line 15, column D, to determine the Schedule M-1 or M-3 requirement.
Schedule and Line Redesigns for 2012
Schedule B (Other Information): Added Questions
The 2012 Instructions note that Schedule B includes additional questions beyond those in prior versions, although the specific wording from previous years is not detailed in the source material. The expansion addresses information needs for proper pass-through reporting.
Payment Card and Third-Party Network Reporting: Eliminated
Before 2012, Form 1120S may have required separate line reporting of gross receipts from payment card transactions. In 2012, the IRS eliminated separate payment card reporting requirements; gross receipts from credit, debit cards, and third-party network payments are not separately reported on Form 1120S—they are included in total gross receipts or sales.
Section 179 and Depreciation: Box 11 Clarification
The instructions explicitly clarify that the Section 179 deduction is not taken on the corporation’s Form 1120S (page 1, line 15) but is instead passed through to shareholders in Schedule K-1, box 11, even if the corporation cannot use a portion due to income limitations.
Form-Specific Limitations for 1120S
Nonresident alien shareholders cannot be shareholders of an S corporation; only U.S. citizens, residents, estates, and certain trusts qualify. Passive loss limitations under Section 469 apply to shareholders' use of S corporation losses. Shareholders cannot deduct passive losses against nonpassive income beyond specified thresholds and must report them consistently. S corporations cannot claim certain credits (e.g., dividends-received deduction) that apply only to C corporations. If the corporation has C corporation accumulated earnings and profits (E&P), distributions are taxed as dividends before AAA is depleted, creating a second tax tier for shareholders.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
