Form 1120S (2015) S Corporation Checklist

ACA-related employer obligations are handled through separate information reporting regimes.

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 if the applicable requirements are satisfied.

Core Reporting Concepts for 2015 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, at-risk, and passive activity rules, on their own returns using the information provided.

Schedule K reports the corporation’s total amounts for each required item. Schedule K-1 provides each shareholder with their specific pro rata share. Accurate reporting depends on tracking ownership throughout the year and following the structure of the 2015 forms rather than relying on assumptions drawn from other entity types.

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 be furnished a Schedule K-1 when due, which is generally the due date of the Form 1120S return, including any extensions filed.

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 2015. Differences between book income and taxable income require reconciliation using the appropriate schedules.

For 2015, nonemployee compensation was generally reported on Form 1099-MISC rather than

Form 1099-NEC. Employment tax returns, such as Forms 941, 944, or 945, are filed separately and are not attached to Form 1120S. Shareholder distributions are reflected through Schedule

K-1 and basis tracking.

Ten-Step Filing Checklist for Form 1120S 2015

1. Step 1: Gather and Organize Income Documentation

   Collect Forms 1099-MISC, 1099-INT, 1099-DIV, 1099-B, and Schedule K-1s received from other pass-through entities. Verify Forms W-2 issued to employees and officers and ensure payroll records support reported wage deductions. Retain bank statements and accounting records supporting income and expenses.

2. Step 2: Report Cost of Goods Sold When Applicable

   Suppose the corporation has inventory, complete Form 1125-A to compute the cost of goods sold. Enter the resulting amount on Form 1120S, page 1, line 2. Identify the inventory valuation method used and ensure it is consistent with prior years, or properly account for approved changes.

3. Step 3: Report Ordinary Business Income or Loss

   Compute gross receipts, cost of goods sold, and deductible expenses on page 1 of Form

   1120S. Determine ordinary business income or loss based on the form instructions. Carry this amount to Schedule K as ordinary income or loss.

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

   Review whether the corporation was an applicable large employer for ACA purposes. Applicable large employers have separate ACA information reporting obligations using Forms 1094-C and

   1095-C. These forms are filed separately and are not attached to Form 1120S or reported through Schedule K-1.

5. Step 5: Complete Schedule K as a Corporate Summary

   Report the corporation’s total income, losses, deductions, credits, and other required items on

   Schedule K. Separately state items required by the instructions, including taxable interest, dividends, charitable contributions, and Section 1231 gains or losses. Ordinary business income or loss remains a non-separately stated item.

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

   Prepare a Schedule K-1 for each shareholder who owned stock during the year. Allocate items based on ownership during the year and include all required identifying information. Furnish each Schedule K-1 to shareholders by the due date of the return, including extensions if applicable.

7. Step 7: Report Capital Gains and Asset Dispositions

   Report capital gains and losses on Schedule D (Form 1120S) when applicable. Separately state short-term and long-term gains on Schedule K and Schedule K-1. Report Section 1231 gains or losses and depreciation-related items using the appropriate forms and schedules.

8. Step 8: Identify Passive Activity Items

   Identify items that may be subject to passive activity rules and report them on Schedule K and

   Schedule K-1 with sufficient detail for shareholders. Do not apply shareholder-level limitations on the corporate return. Shareholders determine whether items are passive based on their own participation and circumstances.

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

   Attach only the schedules and forms that apply to the corporation’s activities, including Schedule

   K and a copy of each Schedule K-1. Follow the 2015 instructions for assembling attachments after page 5 of Form 1120S. Ensure an authorized corporate officer signs and dates the return.

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10. Step 10: Review Line Items and File the Return

    Confirm that taxable interest and tax-exempt interest are reported on the correct Schedule K lines and that qualified dividends are separately identified. Review Schedule K-1 entries for consistency with Schedule K totals. File the return by the required due date or by the extended deadline if a valid extension was filed.

    Form-Specific Limitations and Shareholder

    Considerations

    Nonresident alien individuals are generally not eligible 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 pursue inadvertent termination relief when the requirements are met.

    Credits generally pass through to shareholders and are reported on Schedule K-1.

    Shareholders apply credit limitations and eligibility rules to their own returns. Passive activity losses are generally not deductible against nonpassive income, but statutory exceptions and special rules may apply based on shareholder circumstances.

    Year-Specific Notes for the 2015 Filing Year

    The 2015 instructions emphasize consistent application of passive activity rules and separate reporting of items that affect shareholders differently. No structural redesign of Form 1120S occurred for this year. Changes affecting employers under the Affordable Care Act are reported on separate forms rather than 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 2015 reporting requirements.

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