Form 1120-S (S Corporation)

What Is Form 1120-S (S-Corporation Tax Return)?

Form 1120-S is the tax return for an S-Corporation.
Unlike a personal return, the S-Corp does not pay income tax itself. Instead, it reports:

• The company’s income
• The company’s expenses
• The company’s profit or loss

That profit or loss then passes through to the owner(s) and is reported on their personal tax return.

How an 1120-S Saves You Money

1. Avoids Self-Employment Tax on All Income

With an S-Corp:

• You pay payroll tax only on your W-2 salary

• Remaining profit is not subject to self-employment tax

Allows Legitimate Business Write-Offs

Your S-Corp can deduct:

• Business expenses (office, phone, internet, software)

• Vehicle expenses

• Professional fees

• Insurance

• Retirement contributions

• Health insurance (properly structured)

These deductions reduce the company’s profit, which lowers what flows to you personally.

3. Creates Clean Separation Between You & the Business

The 1120-S:

• Proves the business is a real operating entity

• Protects you during audits, lending, and legal review

• Prevents IRS reclassification issues

This is critical for:

• High earners

• Contractors/consultants

• Real estate investors

• Business owners scaling income

4. Flows to Your Personal Return (K-1)

After the 1120-S is filed:

• You receive a Schedule K-1

• The K-1 reports your share of profit or loss

• That amount flows onto your Form 1040

Important:

You pay tax on the profit whether you withdraw the money or not.

This is why planning matters, not just filing.

5. Payroll + Distributions Strategy

A proper 1120-S includes:

• Reasonable salary (required by IRS)

• Distributions (tax-advantaged income)

We structure this so:
✔ IRS-compliant
✔ Audit-defensible
✔ Maximizes tax savings
✔ Avoids penalties