Instructions for Form 1120S 2019 Checklist
Overview of Form 1120S for Tax Year 2019
Form 1120S for tax year 2019 is the U.S. income tax return used by S corporations to report
income, deductions, credits, and other tax items that pass through to shareholders. The corporation generally does not pay federal income tax at the entity level, but it may owe specific entity-level taxes in limited circumstances. Shareholders report their allocable shares using information provided on Schedule K-1.
Tax Cuts and Jobs Act provisions continued to affect S corporation reporting in 2019. These rules influenced depreciation methods, business interest limitations, and Section 199A qualified business income reporting. The return provides only shareholder-level information and does not compute individual taxes, such as the net investment income tax or the Section 199A deduction.
S Corporation Eligibility and Structural Requirements
Before preparing the return, confirm the corporation remained eligible for S corporation status throughout 2019. Eligibility depends on the corporation being domestic, having only one class of stock, and having no more than 100 shareholders. Eligible shareholders include U.S. citizens or residents, certain estates, and certain qualifying trusts.
A nonresident alien individual is not an eligible shareholder of an S corporation. If an ineligible shareholder acquires stock, the S election generally terminates as of that date, subject to potential relief for inadvertent terminations. Shareholder eligibility must be reviewed carefully when ownership changes occur during the year.
TCJA Considerations Relevant to 2019 Filings
The TCJA introduced reporting obligations that continued to apply in 2019. Section 199A does not change how the S corporation computes taxable income. Still, it requires the corporation to provide shareholders with detailed information so they can compute the deduction on their own returns. This information is reported through Schedule K-1 and required statements.
Bonus depreciation under Section 168(k) applied at a 100 percent rate for qualifying property placed in service during 2019. The phase-down of bonus depreciation applies in later years, but for 2019 returns, the full percentage generally applies when the requirements are met. Business interest limitation rules under Section 163(j) also required tracking of interest expense for shareholder-level reporting.
Ten-Step Checklist for Form 1120S 2019
Step 1: Verify S Corporation Election Status
Confirm that Form 2553 was filed timely and that the S election remained in effect for the entire
2019 tax year. Review eligibility requirements, including shareholder limits and the single-class-of-stock rule. Document any ownership changes to ensure allocations reflect the correct ownership periods throughout the year.
Step 2: Gather Financial and Supporting Records
Collect income statements, bank records, payroll records, and expense documentation supporting amounts reported on the return. Gather Forms W-2 for officers and employees, Form
1099-MISC used for 2019 nonemployee compensation reporting, and mortgage interest or tax statements where applicable. Retain depreciation schedules and prior-year carryforward records.
Step 3: Compute Ordinary Business Income or Loss
Compute ordinary business income or loss on Form 1120S page 1 using the corporation’s accounting records and 2019 tax rules. Include gross receipts, the cost of goods sold when applicable, and deductible expenses. Carry the result to Schedule K line 1 and to Schedule K-1 box 1 for shareholder reporting.
Step 4: Identify and Track Separately Stated Items
Identify items that require separate reporting because they affect shareholders differently. These items may include charitable contributions, capital gains and losses, Section 1231 gains or losses, foreign taxes, and passive activity items. Do not apply shareholder-level limitations at the corporate level.
Step 5: Complete Schedule K as the Corporate Summary
Report total amounts for each income, deduction, credit, and other item on Schedule K. Ensure the totals reconcile to the amounts reported elsewhere on Form 1120S. Schedule K functions as the corporation-level summary and must align with all Schedule K-1 allocations issued to shareholders.
Step 6: Prepare Schedule K-1 for Each Shareholder
Prepare a Schedule K-1 for each shareholder who owned stock during any part of the year, including shareholders who disposed of their interests during 2019. Allocate items using the
appropriate pro rata method based on ownership periods. Provide each shareholder with their
Schedule K-1 for use in preparing their individual return.
Step 7: Provide Section 199A Information to Shareholders
Provide Section 199A-related information through Schedule K-1 and required statements. This may include qualified business income, allocable W-2 wages, and unadjusted basis immediately after acquisition of qualified property, when applicable. This information supports shareholder-level Section 199A calculations and is not itself a deduction on Form 1120S.
Step 8: Report Asset Transactions and Depreciation
Use Form 4562 to report depreciation, amortization, Section 179 expense, and bonus depreciation claimed for 2019. Report sales or exchanges of business property, including
Section 1231 transactions and depreciation recapture, on Form 4797 when applicable. Report capital asset transactions on Schedule D (Form 1120S) as required.
Step 9: Attach Applicable Schedules and Forms
Attach only the schedules and forms required based on the corporation’s activities. These may include Schedule D, Form 4562, Form 4797, Form 8824 for qualifying real property like-kind exchanges, Form 3115 for accounting method changes, and Form 1125-A for cost of goods sold. Do not attach individual-only schedules.
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Step 10: Sign, Assemble, and File the Return
Ensure an authorized corporate officer signs and dates the return and prints their name and title.
If a paid preparer prepared the return, the preparer must complete and sign the preparer section. File the return by the fifteenth day of the third month following the close of the tax year, which is March 15, 2020, for calendar-year 2019 filers.
Form-Specific Limitations and Shareholder Tax Treatment
S corporations generally are not subject to corporate alternative minimum tax, but they must report alternative minimum tax items to shareholders on Schedule K-1 when applicable.
Shareholders use this information to determine their own AMT exposure, if any. The corporation itself does not compute or pay shareholder-level AMT.
Losses and deductions reported by the S corporation pass through to shareholders and remain subject to shareholder-level limitations. These include basis limitations, at-risk rules, and passive activity loss rules. Net operating loss computations, when applicable, generally occur at the shareholder level rather than on the S corporation return.
Key Reporting Updates for the 2019 Filing Year
The 2019 instructions refined Section 199A reporting requirements by revising Schedule K-1 codes and insisting that there must be attached statements to support shareholder calculations.
These changes focused on improving consistency and clarity rather than introducing a new entity-level deduction.
Before filing, review the return for internal consistency. Confirm Schedule K totals match the aggregate of Schedule K-1 amounts, ownership allocations reflect the year’s activity, and only applicable schedules are attached. Careful review supports accurate compliance for the 2019 filing year.
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