Form 1120S (2014) Reporting and Compliance Guide

Instructions for Form 1120S 2014 Checklist

Overview of Form 1120S for Tax Year 2014

S corporations use Form 1120S for tax year 2014 to report income, losses, deductions, and credits that pass through to shareholders. The corporation generally does not pay federal income tax at the entity level because shareholders report their allocable shares on their own returns. The filing includes Schedule K as part of the return and a Schedule K-1 prepared for each shareholder.

The 2014 filing year reflects continuity in the S corporation pass-through structure. Legislative changes enacted in later years, including the Tax Cuts and Jobs Act and subsequent relief acts, do not apply. Affordable Care Act provisions referenced in the 2014 instructions address information reporting timing, but Form 1120S itself is not used to reconcile employer shared responsibility payments for this year.

Eligibility and S Corporation Status Requirements

An S corporation must meet all eligibility requirements for the entire tax year to file Form 1120S.

The corporation must be domestic, must have no more than 100 shareholders, must have only one class of stock, and must have only eligible shareholders. Eligible shareholders generally include U.S. citizens or residents, certain trusts, and estates.

If the corporation ceases to qualify as a small business corporation during the year, the S election terminates automatically as of the date the requirements are no longer met. This termination occurs by operation of law rather than by voluntary revocation. Relief for an inadvertent termination may be available when the applicable requirements are satisfied.

Core Reporting Concepts for 2014 Filers

S corporations compute income and deductions at the corporate level using standard tax accounting rules. Certain items must be reported separately because they affect shareholders differently, while other items combine into ordinary business income or loss. Shareholders apply limitations, including basis and passive activity rules, on their own returns using the information provided.

Schedule K summarizes all items allocated to shareholders, and Schedule K-1 provides each shareholder with their specific share of those items. Accurate reporting depends on tracking ownership throughout the year and following the 2014 form structure, rather than relying on later-year formats or assumptions.

Shareholder Allocations and Schedule K-1 Timing

Allocations of income, loss, deductions, and credits generally follow a per-share, per-day method for the period each shareholder owned stock during the year. This rule applies unless a permitted method applies due to ownership changes. Allocations based only on year-end ownership can misstate shareholder reporting.

A Schedule K-1 must be prepared for every shareholder who owned stock during any part of the year. Each shareholder must receive a Schedule K-1 by the date the Form 1120S return is required to be filed, including any extensions in effect.

Records Required to Support the Return

Preparing Form 1120S requires maintaining records that support income, deductions, payroll, and shareholder activity. These records must align with the corporation’s books and with tax definitions applicable to 2014. Differences between book income and taxable income require reconciliation using the appropriate schedules.

Employment tax records support wage deductions and officer compensation. For 2014, nonemployee compensation was generally reported on Form 1099-MISC, and those records support income and expense reporting. Shareholder distributions are reflected through

Schedule K-1 and shareholder basis tracking rather than through dividend reporting forms.

Ten-Step Filing Checklist for Form 1120S 2014

1. Step 1: Verify Eligibility and S Election Status

   Confirm that the corporation met all S corporation eligibility requirements throughout the 2014 tax year. Verify that a valid S election was in effect and that no ineligible shareholders held stock during the year. If the election was first made for 2014, ensure that Form 2553 was timely filed.

2. Step 2: Gather Required Source Documents

   Collect Forms W-2 issued to employees and officers, Forms 1099-MISC for nonemployee compensation, prior-year Schedule K-1s, and records of shareholder capital contributions and distributions. These documents support income reporting, expense deductions, and shareholder allocations.

3. Step 3: Complete Income and Deduction Sections

   Report gross receipts, cost of goods sold, and gross profit following the line-by-line instructions on Form 1120S. Include all applicable categories of ordinary business income and deductions.

   Ensure reported totals agree with the corporation’s accounting records.

4. Step 4: Address Affordable Care Act Information Reporting Context

   Review the Affordable Care Act information reporting guidance included in the 2014 instructions.

   Information reporting requirements generally apply to calendar years beginning after December

   31, 2014, with voluntary reporting permitted for 2014. Form 1120S does not require reporting an employer shared responsibility payment for this year.

5. Step 5: Complete Schedule K Accurately

   Report income, loss, deductions, credits, and other items on Schedule K using the line structure shown on the 2014 form. Separately state only those items required by the instructions.

   Ordinary business income or loss is reported as a non-separately stated item.

6. Step 6: Prepare Schedule K-1 for Each Shareholder

   Complete one Schedule K-1 for each shareholder, reflecting allocations based on ownership during the year. Include required identifying information and ownership percentages. Furnish each Schedule K-1 to the shareholder by the return due date, including extensions when applicable.

7. Step 7: Complete Balance Sheet and Reconciliation Schedules

   Determine whether Schedules L, M-1, and M-2 are required based on the corporation’s facts and the 2014 instructions. When required, report beginning and ending balance sheets, reconcile book income to taxable income, and analyze changes in shareholder equity accounts.

8. Step 8: Report Passive Activity Items Properly

   Identify passive activity income, losses, and credits and report them separately on Schedule K and Schedule K-1. Do not net passive losses against active income on the corporate return.

   Shareholders apply passive activity limitation rules on their own returns.

9. Step 9: Assemble Applicable Attachments and Sign the Return

   Attach only the schedules and forms that apply to the corporation’s activities, along with required Schedule K-1s and supporting statements. Follow the 2014 instructions for assembling the return after page 5. Ensure an authorized corporate officer signs and dates the return.

10. Step 10: File the Return by the Correct Due Date

    For calendar-year 2014 S corporations, the filing due date was March 16, 2015, because March

    15 fell on a Sunday. File the return by that date or by the extended deadline if a valid extension was filed. Determine the correct mailing address using the 2014 Where To File table.

    Form-Specific Limitations and Deductions

    Nonresident alien individuals are not eligible to be shareholders of an S corporation. If an ineligible shareholder acquires stock, the S election terminates automatically as of the date eligibility is lost. The corporation may seek inadvertent termination relief when the applicable requirements are met.

    For tax year 2014, the domestic production activities deduction under former IRC Section 199 applied at the shareholder level. The S corporation did not claim the deduction directly.

    Shareholders computed and reported the deduction using the appropriate forms applicable to that year.

    Year-Specific Notes for the 2014 Filing Year

    The 2014 instructions include updates affecting disclosure and compliance. Additional questions were added to Schedule B, requiring more detailed responses. The instructions also clarify that gross receipts from payment cards and third-party network transactions are not separately reported on Form 1120S.

    Before filing, review the return for internal consistency. Confirm that Schedule K totals match the aggregate of Schedule K-1 amounts, required schedules are included when applicable, and shareholder information reflects ownership during the year. Careful review supports accurate compliance with 2014 reporting requirements.

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