IRS-Accurate Form 1120-S Checklist for Tax Year 2013
Form 1120-S in 2013 applies pass-through taxation to domestic corporations with eligible shareholders, provided a valid Form 2553 election is on file with the Internal Revenue Service. A unique 2013 provision allows taxpayers to deduct Typhoon Haiyan relief contributions made between March 26, 2014, and April 15, 2014, on their 2013 return, provided the contributions satisfy all charitable deduction requirements and record-keeping standards.
This special provision enables taxpayers to claim disaster relief contributions made after the close of the tax year but before the filing deadline as if they were made during the 2013 tax year. No Affordable Care Act shared responsibility payments, Tax Cuts and Jobs Act provisions, American Rescue Plan Act expansions, or economic impact payment reconciliation apply to 2013 Form 1120-S, as these programs were enacted in subsequent years.
Year-Specific Relief Programs for 2013
Specific cash contributions for Typhoon Haiyan relief efforts in the Philippines made after March 25, 2014, and before April 15, 2014, may be deducted on the 2013 tax return if made to a qualified charitable organization designated to receive such contributions. This special election enables corporations to accelerate the timing of their charitable deductions, providing immediate tax benefits for disaster relief contributions made shortly after the end of the tax year. A telephone bill showing the donee organization's name, contribution date, and amount satisfies the recordkeeping requirement for contributions made by phone or text message, providing simplified substantiation for these emergency relief donations.
Comprehensive Ten-Step Filing Checklist
Step 1: Verify S Corporation Election Validity
Confirm that Form 2553 (Election by a Small Business Corporation) was timely filed and accepted by the IRS, as the S election must be in effect for the entire tax year to file Form 1120-S. The election deadline is generally the 15th day of the third month of the tax year for which the election is to take effect, or at any time during the preceding tax year.
Retain the IRS acceptance notice showing the election effective date in the corporation’s permanent tax files, as this documentation proves the validity of S status and may be required during IRS examinations or when processing amended returns.
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.
Step 2: Confirm Eligible Shareholder Status Throughout Tax Year
Verify that all shareholders throughout 2013 are individuals who are U.S. citizens or residents, qualified estates, qualified trusts, including grantor trusts and electing small business trusts, or specified tax-exempt organizations under Section 401(a) or Section 501(c)(3). Ensure that no nonresident aliens or foreign corporations held stock during the tax year, as the presence of one ineligible shareholder will terminate the S election immediately.
Review all stock transfers during 2013 to ensure no disqualifying transactions occurred that would invalidate S status.
Step 3: Gather Financial Records and Income Documentation
Collect all documentation supporting gross receipts, including sales invoices, cash register tapes, and deposit records. Assemble documentation for the cost of goods sold, including beginning and ending inventory valuations, purchase invoices, and direct labor costs. Gather operating expense documentation, including receipts, cancelled checks, and vendor statements.
Obtain W-2 forms for all officers and employees, Form 1099 received from customers or other payors, the prior-year Form 1120-S if applicable for comparative analysis, and bank statements reconciling all business accounts.
Document all sources of business income, including sales revenue, rental income, interest income, dividend income, capital gains from asset dispositions, and any other income items that must be reported.
Step 4: Complete Page 1, Part I, Business Information and Income Section
Enter the complete business name exactly as registered with the IRS, the Employer Identification Number, the date of incorporation shown on the corporate charter, the S election effective date from the Form 2553 acceptance letter, and the principal business activity code from the instructions corresponding to the corporation’s primary business activity.
Report gross receipts or sales on line 1a, deduct returns and allowances on line 1b, report cost of goods sold on line 2 using amounts calculated on Form 1125-A, and calculate gross profit on line 3 by subtracting line 2 from line 1c. Continue entering all income items through line 5, including net gain or loss from Form 4797, other income items, and arriving at total income.
Step 5: Complete Page 1 Officer Compensation and Allowable Deductions
Enter total compensation of officers on line 7, including all salaries, wages, bonuses, and taxable fringe benefits provided to shareholder-officers and non-shareholder officers. This amount must reflect reasonable compensation for services actually rendered, as the IRS closely scrutinizes officer compensation in S corporations to prevent disguising distributions as deductible wages.
Complete lines 8 through 19 reporting salaries and wages to employees other than officers (reduced by any employment credits claimed), repairs and maintenance expenses, bad debt expense using either the specific charge-off method or conformity election method, rents paid for business property, taxes and licenses excluding federal income taxes, interest expense on business debts, depreciation not claimed elsewhere using amounts from Form 4562, depletion other than oil and gas depletion, advertising expenses, pension and profit-sharing plan contributions, employee benefit programs including health insurance, and other allowable deductions with a supporting schedule attached if the total exceeds certain thresholds.
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.
Step 6: Prepare Form 1125-E for Officer Compensation Detail
If the corporation has total receipts of $500,000 or more for the tax year, complete Form 1125-E (Compensation of Officers) to report detailed information for each officer, including full name, Social Security number, title or position held, percentage of time devoted to business operations, percentage of stock owned, and total deductible compensation attributable to that officer.
This form provides the IRS with transparency into officer compensation arrangements and supports the reasonableness analysis that may be required during examination. Attach the completed Form 1125-E to the front of Form 1120-S in the designated attachment sequence.
Step 7: Complete Schedule K Reporting Shareholders’ Pro Rata Share Items
Report ordinary business income or loss from line 21 of page 1 on Schedule K, line 1, representing the aggregate amount that will be allocated among shareholders according to their ownership percentages. Enter net rental real estate income or loss, other rental income or loss from activities not classified as real estate, interest income from all sources, ordinary dividends and separately stated qualified dividends, royalty income, net short-term capital gain or loss from Schedule D, net long-term capital gain or loss from Schedule D, net section 1231 gain or loss from Form 4797, and other income items requiring separate statement.
Include alternative minimum tax adjustment and preference items, foreign transaction information, including foreign taxes paid and foreign source income by category, and other items affecting shareholders’ individual tax returns, including Section 179 deduction, charitable contributions, and investment interest expense.
Step 8: Prepare Schedule L and Appropriate Reconciliation Schedule
If the corporation’s total receipts for the tax year were $250,000 or more OR total assets at year-end were $250,000 or more, complete Schedule L (Balance Sheets per Books) showing financial position as of the beginning and end of the tax year.
Report all assets, including cash, accounts receivable, inventories, depreciable assets, land, and other assets. Report all liabilities, including accounts payable, mortgages, and notes payable, as well as other current and long-term liabilities. Report shareholders’ equity, including capital stock, additional paid-in capital, retained earnings, and accumulated adjustments account.
If total assets at year-end are $10 million or more, complete Schedule M-3 (Net Income Reconciliation for Corporations With Total Assets of $10 Million or More) instead of Schedule M-1, providing a detailed reconciliation of income and deductions per books with income per return. Otherwise, complete Schedule M-1 (Reconciliation of Income per Books With Income per Return) explaining all differences, including tax-exempt income, nondeductible expenses, and timing differences.
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.
Step 9: Complete Schedule M-2 If Applicable
If the corporation has accumulated earnings and profits from prior C corporation years or shareholders’ previously taxed income, complete Schedule M-2 (Analysis of Accumulated Adjustments Account, Other Adjustments Account, and Shareholders’ Undistributed Taxable Income Previously Taxed) reporting beginning and ending balances of the accumulated adjustments account, other adjustments account, shareholders’ undistributed taxable income previously taxed, and accumulated earnings and profits.
Account for all distributions to shareholders during the tax year, showing how distributions are allocated among these accounts under the ordering rules of Section 1368. This schedule tracks the tax attributes essential for determining the tax treatment of distributions and maintaining proper basis calculations.
Step 10: Prepare Schedule K-1, Execute Signatures, and File Timely
For each shareholder, prepare Schedule K-1 (Shareholder’s Share of Income, Deductions, Credits, etc.) showing the shareholder’s complete name, taxpayer identification number, ownership percentage at year-end, and weighted average ownership percentage if it changed during the year, and the shareholder’s pro rata share of all income, losses, deductions, and credits from Schedule K allocated according to ownership percentage and holding period.
Sign and date page 1 of Form 1120-S in the designated signature area with an authorized corporate officer certifying under penalties of perjury that the return is accurate, correct, and complete. If the corporation dissolved during 2013, file the return by the 15th day of the third month following the dissolution date.
Furnish Schedule K-1 copies to each shareholder by the return due date, including extensions, enabling shareholders to report their distributive shares on their individual returns.
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.
Assemble all schedules in the required order after page 5: Schedule D (Capital Gains and Losses and Built-In Gains), Schedule L (if prepared), Schedule M-1 or M-3 (if prepared), Schedule M-2 (if prepared), Schedule K (Shareholders’ Pro Rata Share Items), and all supporting attachments in attachment sequence number order. Do not include copies of Schedule K-1 when filing the return with the IRS, but retain complete copies in the corporation’s records.
Notable 2013 Line Changes from Prior Years
Line 23c introduces specific reporting for the credit for federal tax paid on fuels, requiring attachment of Form 4136 (Credit for Federal Tax Paid on Fuels). Prior tax years included fuel tax credits within the general deduction or credit provisions without separately identifying them as a distinct line item, or combined them with estimated tax payment reporting.
The 2013 Form 1120-S clarifies and separates this credit from estimated tax payment lines, enabling distinct tracking of fuel tax credits claimed by the corporation and providing improved transparency for IRS processing and examination purposes.
Form-Specific Limitations Applicable to S Corporations
S corporations face unique limitations distinguishing them from both C corporations and partnerships. An S corporation reports officer compensation as a deduction on the corporate return, reducing ordinary business income that passes through to shareholders on Schedule K-1.
The corporation cannot deduct oil and gas depletion on the corporate return; instead, each shareholder determines their allowable depletion deduction individually on their personal tax return based on their share of depletable property and their adjusted basis in the property. This shareholder-level calculation ensures that depletion limitations apply correctly based on each shareholder’s individual tax situation and investment in the depletable property.
Recordkeeping and Documentation Standards
Maintain comprehensive books and records supporting all amounts reported on Form 1120-S for the period of limitations, generally three years from the filing date but extending to six years if a substantial income understatement exists.
Essential documentation includes complete accounting records prepared using a consistent method of accounting, bank statements and reconciliations for all business accounts, invoices and receipts supporting all deductions claimed, employment tax records including Forms 941 and state unemployment tax returns, shareholder basis tracking worksheets showing annual adjustments for income, loss, and distributions, and corporate minutes documenting all significant business decisions, including officer compensation, distributions, and capital transactions.
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.
Conclusion
Completing the 2013 Form 1120-S requires systematic verification of the validity, confirmation of shareholder eligibility throughout the tax year, accurate calculation and classification of income and deductions, proper completion of all the necessary schedules, including Schedule K, which allocates income to shareholders, and timely preparation and distribution of Schedule K-1 to each shareholder.
The ten-step checklist provides a comprehensive framework ensuring all filing requirements are met while preserving S corporation tax advantages and maintaining compliance with Internal Revenue Code provisions governing small business corporations. Understanding year-specific provisions, including the Typhoon Haiyan relief contribution election and the enhanced reporting requirements for officer compensation, enables accurate and complete reporting for tax year 2013.
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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.
