What IRS Form 1120-S (2023) Is For

Form 1120-S is the federal income tax return that S corporations must file annually to report their income, deductions, credits, and other tax information to the IRS (IRS Instructions for Form 1120-S (2023)). S corporations are pass-through entities, so profits and losses flow directly to shareholders, who report them individually using Schedule K-1.

When You’d Use Form 1120-S for 2023 (Late or Amended Filing)

You’ll need to file Form 1120-S for 2023 if you missed the March 15, 2024 deadline, did not request an extension, or need to correct errors on an originally filed return. Late filings may result in $220 monthly penalties per shareholder (up to 12 months), plus 5% of unpaid tax, with a $485 minimum penalty for returns filed 60+ days late.

Key Rules Specific to 2023

• The 100% business meal deduction expired; only 50% remains deductible.
  
  
• New digital asset reporting questions were added to Schedule B.
  
  
• Corporations filing 10+ returns in 2024 must e-file, unless hardship relief is granted.
  
  
• Energy-efficient commercial buildings deduction applied for qualifying property placed in service in 2023.
  
  

Step-by-Step (High Level)

• Gather records and transcripts: Request IRS transcripts with Form 4506-T or online to confirm filing history.
• Complete the correct form: Use the 2023 version and prepare K-1s for each shareholder.
• Attach supporting schedules: Include Schedule D, Form 4797, and others in required order.
• File return: Mail to the IRS or e-file (mandatory for 10+ returns).
• Keep records: Save copies of all filings, schedules, and amended K-1s for compliance.

Common Mistakes and How to Avoid Them

• Incorrect compensation: Pay shareholder-employees reasonable wages before distributions.
  
  
• AAA errors: Properly track income and distributions on Schedule M-2.
  
  
• Missing or late K-1s: Penalties apply for each incorrect or untimely K-1 issued.
  
  
• Pass-through misclassification: Ensure Schedule K reflects correct reporting.
  
  
• Ignoring basis limits: Shareholder losses cannot exceed basis in stock and loans.
  
  
• E-filing noncompliance: Ensure mandatory e-filing is met if applicable.
  
  

What Happens After You File

The IRS processes e-filed returns within 2–3 weeks and paper returns in 6–8 weeks. Notices may request additional information or propose adjustments. If additional tax is owed, installment agreements can be requested using Form 9465. Small balances (under $25,000) may qualify for online payment plans. Penalty relief requests are available with reasonable cause explanations.

FAQs

Can I still get a refund if I’m filing late?

Yes, but only if filed within three years of the original due date. For 2023 returns, the deadline is March 15, 2027. After that, refunds expire even if taxes were overpaid. Filing promptly is recommended to both secure refund eligibility and minimize late penalties that increase each month.

How do I get copies of previous returns if I lost them?

Request business tax transcripts online at IRS.gov, call 800-908-9946, or file Form 4506-T by mail. Electronic filings are usually available within 2–3 weeks, while paper returns may take 6–8 weeks. Transcripts provide return summaries and account details, which can help reconcile prior filings or support preparation of amended or late returns.

What if shareholders already filed personal returns with incorrect K-1 information?

You must issue amended Schedule K-1s reflecting accurate information and file an amended Form 1120-S. Shareholders must then amend their individual returns using Form 1040X to correct income, deductions, or credits. Prompt issuance of amended K-1s reduces penalties and ensures compliance across both corporate and shareholder tax reporting obligations.

Do I need to amend state returns too?

Yes, in most cases. State tax agencies generally require amendments when federal returns are amended, especially when income or deduction changes affect state taxable income. Contact your state’s tax authority for specific deadlines, forms, and procedures, as requirements vary significantly. Ignoring state amendments may lead to penalties or delayed processing of federal changes.

Can penalties be reduced or eliminated?

Yes, penalties may be reduced or removed if you demonstrate reasonable cause. Examples include serious illness, natural disasters, or reliance on erroneous professional advice. Submit a penalty abatement request with Form 843 or directly to the IRS in writing. While penalties may be waived, accrued interest on unpaid taxes generally cannot be reduced.

What if I discover errors after filing?

File an amended Form 1120-S using the 2023 version, check box H(4), and include a clear explanation of the changes. Provide corrected K-1s to shareholders to ensure their individual returns are accurate. Maintain detailed documentation of amendments to support your corrections in case of future IRS inquiries or examinations.

How long do I have to keep records?

Maintain records for at least three years after filing Form 1120-S, including returns, schedules, and K-1s. Keep basis records, property documentation, and shareholder agreements longer, since they affect future deductions, distributions, and ownership changes. Proper recordkeeping ensures compliance, supports amended filings, and helps defend against IRS challenges during audits or tax disputes.

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