What IRS Form 1120-S (2018) Is For
IRS Form 1120-S (2018) is the U.S. Income Tax Return for an S Corporation, used for income tax purposes to report income, deductions, credits, and other tax obligations. An S corporation is a pass-through entity, where the corporation's income is passed directly to its shareholders, who report the income on their individual tax returns.
To qualify for S corporation status, a corporation must elect to do so using Form 2553. Only certain trusts, small business corporations, and eligible domestic corporations are eligible to apply, excluding nonresident aliens and other types of corporations. For federal tax purposes, S corporations avoid double taxation since shareholders pay taxes on their share of profits. This treatment distinguishes them from C corporations, which are taxed at both the corporate and personal tax levels.
If your business has unresolved filings from previous years, reviewing any unfiled 1120-S S corporation returns can prevent penalties and ensure IRS compliance.
When You’d Use Form 1120-S for 2018 (Late or Amended Filing)
Businesses use this form to report or correct their 2018 tax year filings. Late filing may occur if the IRS issued notices, assessed penalties, or created substitute returns. Filing ensures income, deductions, and tax payments are properly recorded for federal tax purposes.
If you have received a failure-to-file penalty or a failure-to-pay penalty, filing helps prevent additional charges. You can request a payment plan or demonstrate reasonable cause to have penalties reduced. Interest continues to accrue until full payment is made. Filing protects corporate status, avoids enforcement actions, and ensures accurate tax records for the previous year.
Refunds for 2018 expired in March 2022, but filing is still essential to correct errors, verify shareholder information, and settle outstanding federal tax. Compliance helps maintain good standing with financial institutions and supports accurate reporting at the state level. If you are unsure which supporting documents or schedules must be included for a late or corrected filing, the IRS Form Help Center provides guidance for older-year S corporation returns.
Key Rules Specific to 2018
- Tax Cuts and Jobs Act (TCJA): The 2018 tax year introduced the Section 199A deduction for pass-through income at the shareholder level.
- Late Filing Penalty: The minimum penalty was $200 per shareholder per month, up to a maximum of 12 months.
- Reasonable Compensation: S corporation owners had to pay themselves reasonable wages before taking profit distributions.
- Accumulated Adjustments Account (AAA): Accurate maintenance was necessary for proper reporting of distributions and passive income.
S corporations dealing with penalties, shareholder adjustments, or TCJA-related deductions may find support through available business tax relief programs designed for federal compliance issues.
Step-by-Step (High Level)
- Gather IRS Records: Request transcripts from IRS.gov or by calling 800-908-9946 to confirm income, penalties, and IRS interest.
- Complete the Correct Form: Fill out IRS Form 1120-S (2018) with all schedules, including K and K-1s, for each shareholder.
- Amend When Needed: Include explanations for line changes, dates, and reasons when filing amended returns.
- Distribute K-1s: Provide each shareholder with a Schedule K-1 to assist them in reporting income on their personal tax returns.
- File the Return: You can e-file or mail your return to the proper IRS mailing address, based on your business location.
- Retain Copies: Keep all records, payment proofs, and correspondence for audit or compliance purposes.
If you owe federal tax or penalties after completing the return, you may apply for an IRS payment plan to manage the outstanding balance over time.
Common Mistakes and How to Avoid Them
- Improper Compensation: Pay reasonable wages to shareholder-employees to prevent the IRS from reclassifying distributions and imposing additional federal or Medicare tax liabilities.
- AAA Errors: Track and reconcile prior C corporation earnings accurately to ensure the corporation’s income and deductions remain correct.
- Missing Schedule K-1s: Prepare and distribute complete, timely Schedule K-1s to avoid mismatches on individual income tax returns.
- Penalty Miscalculations: Review shareholder allocations carefully to ensure accurate penalty calculations and prevent overpayment.
- Incomplete Amendments: Include all required documentation when filing amendments to ensure smooth processing and reduce the risk of additional review.
- Interest Misunderstanding: Monitor applicable IRS interest rates on late payments to manage and minimize unexpected costs.
Late or inaccurate filings can lead to IRS enforcement notices, making it helpful to review the IRS collection process to understand how the agency responds to unresolved tax issues.
What Happens After You File
Once you file taxes, the IRS generally processes returns within 8–12 weeks, though amended filings may take longer. Businesses may receive notices confirming receipt or requesting clarification. Payment plans using Form 9465 can help manage any remaining tax bill or late payment penalty.
If you owe excise taxes or additional federal tax, pay promptly to prevent further penalties. Failure to pay the penalty continues to accrue until the full amount is paid. For federal tax purposes, maintaining updated records ensures compliance with income tax laws.
Financial institutions often require proof of tax compliance, making timely filing crucial for future loan applications. Verify your employer identification number, mailing address, and due date to prevent IRS rejections. You can contact the IRS directly for updates on processing or to inquire about penalty adjustments.
FAQs
Can I still file IRS Form 1120-S (2018) for my S corporation if it’s late?
Yes, the IRS allows late filing of IRS Form 1120-S (2018) for any S corporation, but penalties apply. The failure to file penalty and failure to pay penalty continue monthly until resolved. Filing now helps reduce enforcement actions and preserves your business’s corporate status.
What happens if my S corporation tax return is subject to a filing penalty or a late filing issue?
If an S corporation misses the original due date, the IRS charges both a filing penalty and a late filing penalty. These are based on the number of shareholders and the number of months overdue. Reasonable cause can reduce the amount owed, and a payment plan can help you pay taxes over time.
How do tax payments and federal tax obligations work for a small business corporation?
A small business corporation reports income on IRS Form 1120-S (2018) and passes earnings to shareholders, who report income tax on personal tax returns. Payment of federal tax occurs at the shareholder level; however, the corporation may owe excise taxes or interest if outstanding balances remain.
What if my corporation status changes or I no longer qualify as an S Corp?
If you lose S corp status or no longer qualify, you may need to file as a C corporation using Form 1120. For income tax purposes, this change affects the application of tax payments and deductions. Reasonable cause or a timely election may allow for the reinstatement of S corporation status.
How can I handle a failure-to-file penalty or request a payment plan after late filing?
If you receive a failure-to-file penalty notice, contact the IRS directly and request relief or a payment plan. Provide your employer identification number, business address, and reasonable cause for the delay. Timely response helps limit interest and ensures compliance for future tax years.
