What IRS Form 1120-S (2021) Is For

Form 1120-S is the annual tax return that S corporations must file to report their income, gains, losses, deductions, and credits to the IRS (IRS Instructions for Form 1120-S (2021)). S corporations are pass-through entities, meaning they don’t pay corporate-level tax—profits and losses pass through to shareholders, reported individually on Schedule K-1 forms.

When You’d Use Form 1120-S for 2021 (Late or Amended Filing)

You would file a late 2021 Form 1120-S if you received IRS notices about unfiled returns, missed the March 15, 2022 deadline, or discovered K-1 errors that affect shareholders. You’d amend if incorrect pass-through items were originally reported. While refunds aren’t typical, corrections can affect shareholder basis, loss limitations, and reporting obligations for future years.

Key Rules Specific to 2021

• Schedules K-2 and K-3 introduced for international items, replacing parts of Schedule K and K-1.
  
  
• PPP loan forgiveness: Reported as tax-exempt income, affecting stock basis and Accumulated Adjustments Account (AAA).
  
  
• 100% meal deduction available for 2021 and 2022 business meals under pandemic relief rules.
  
  
• Late filing penalty: $210 per shareholder per month (up to 12 months).
  
  

Step-by-Step (High Level)

1. Gather records: Use Form 4506-T for transcripts and collect all financial statements.
   
   
2. Complete Form 1120-S (2021): Use only the 2021 version.
   
   
3. Prepare schedules: Schedule K, shareholder K-1s, Schedule M-2, and Schedules K-2/K-3 if applicable.
   
   
4. Attach supporting documents: Forms such as Schedule D or Form 4797 for asset sales.
   
   
5. File and distribute: Mail or e-file return, provide K-1s to shareholders.
   
   
6. Keep detailed records: Maintain complete return packages for IRS or audit needs.
   
   

Common Mistakes and How to Avoid Them

• Errors in basis tracking (AAA, OAA, accumulated earnings and profits).
  
  
• Failing to pay reasonable compensation to shareholder-employees before distributions.
  
  
• Missing or inaccurate K-1 forms, leading to downstream errors on shareholder returns.
  
  
• Ignoring international reporting obligations requiring Schedules K-2 and K-3.
  
  
• Filing with the wrong-year form instead of the 2021 version.
  
  
• Omitting required schedules such as Schedule D or M-3 for larger corporations.
  
  

What Happens After You File

The IRS typically processes returns within 3–6 months, though late or amended returns may take longer. Expect notices if discrepancies arise, or penalties are assessed. Penalties are $210 per shareholder per month for late filings, capped at 12 months. Payment plans are available through Form 9465. Adjustments may also require shareholders to file amended personal returns.

FAQs

How much is the late filing penalty for 2021 S corporation returns?

The late filing penalty is $210 per shareholder for each month or part of a month the return is late, capped at 12 months. This applies even if no tax is owed since penalties are based on filing obligations, not liability. Small corporations can face substantial penalties if filing several months late.

Can I get the late filing penalty waived?

Yes. You may request penalty relief if you can show reasonable cause for missing deadlines. Examples include natural disasters, medical emergencies, or reliance on faulty professional advice. To request, submit Form 843 or attach a detailed letter explaining circumstances. Supporting documents such as hospital records or proof of disaster declarations strengthen your case.

Do I need to amend shareholders’ individual returns if I file a corrected 2021 S corporation return?

Yes, if K-1 information changes. Shareholders must update their individual returns to reflect corrected pass-through amounts. Amended K-1s marked as such should be issued to each affected shareholder. This ensures income, deductions, and credits are properly reported, preventing IRS mismatches or audits on shareholder returns based on outdated or incorrect corporate filings.

How do I get transcripts or copies of my unfiled 2021 S corporation return information?

You can request transcripts online at IRS.gov, by phone, or through Form 4506-T. For full return copies, use Form 4506 and pay the associated fee. Transcripts provide account activity, payments, and adjustments, while copies give the exact filed return. Businesses with authorized officers can request them by mail or electronically.

Is there a deadline for filing an amended 2021 S corporation return?

Yes. Amended returns generally must be filed within three years of the original due date or the date the return was filed, whichever is later. For calendar-year corporations, the 2021 deadline was March 15, 2022, so most amendments must be submitted by March 15, 2025. Amending after this window limits correction options.

What if my S corporation had no income in 2021—do I still need to file?

Yes. All S corporations must file Form 1120-S annually, even if they had no income, expenses, or activity. The IRS still requires reporting because the election remains in effect until terminated. Filing zero-activity returns avoids late filing penalties and demonstrates compliance with ongoing tax obligations, regardless of operational status.

Should I also file amended state returns?

Yes, in most cases. Many states follow federal treatment of S corporations, so changes to Form 1120-S often impact state filings. Failure to file amended state returns can result in penalties or discrepancies during audits. Always check with your state’s tax authority for specific filing requirements, deadlines, and additional documentation needed.

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