S corp tax documents: what the corporation and the shareholder each need

An S corporation is a corporation that has elected, on Form 2553, to pass its income, losses, deductions and credits through to its shareholders (IRS, S corporations). The corporation files Form 1120-S, and each shareholder reports a share on their own return (IRS, About Form 1120-S). So one client is really two jobs, each with its own document list.

Form 1120-S is due by the 15th day of the third month after the tax year ends (Form 1120-S instructions (2025)). For a calendar-year corporation, the 2025 return was due March 16, 2026, because March 15 fell on a Sunday (Form 1120-S instructions (2025)). For the 2026 return, the same rule gives Monday, March 15, 2027 (Form 1120-S instructions (2025)). Shareholders cannot finish their own returns without the K-1, so the corporate file comes first.

A late or incomplete 1120-S is charged per shareholder. For 2025 returns, the charge is $255 a month for each person who was a shareholder, for up to 12 months (Form 1120-S instructions (2025)). For an 1120-S required to be filed in 2027, the monthly figure is $260 (IRS Rev. Proc. 2025-32). A corporation with three owners that files two months late on a 2026 return therefore faces $1,560 (IRS Rev. Proc. 2025-32).

The corporate return starts from the year-end trial balance, profit and loss and balance sheet, backed by every bank and card statement. Ask for last year’s Form 1120-S with every Schedule K-1 too. It carries the balance sheet, retained earnings and the depreciation schedule forward.

Deductions are the costs of running the business, such as rent, insurance, software, supplies, contract labor and professional fees. Each needs an invoice or receipt. When total receipts reach $500,000 or more, officer pay is broken out on Form 1125-E (Form 1120-S instructions (2025)). Equipment rules, such as the yearly de minimis election for small purchases, are on the small business checklist.

The corporation is also a payer. A web developer it paid $1,000 in 2025 needed a Form 1099-NEC, while one paid $1,000 in 2026 falls under the new line (Forms 1099-MISC and 1099-NEC instructions, 2025) (Forms 1099-MISC and 1099-NEC instructions (rev. 12/2026)). Keep a Form W-9 for each one and copies of the forms filed, so contract labor on the return ties to them.

Owner pay is where S corporation files go wrong. The corporation must pay a shareholder who works in it reasonable compensation, which is wages that fit the services the owner provides, before it makes other distributions (IRS, S corporation compensation). The IRS can reclassify distributions as wages that are subject to employment taxes (IRS, S corporation compensation). Keep notes on the owner’s duties and hours, and any pay data used to set the salary.

Health insurance for an owner with a large stake is a special case. For a more-than-2% shareholder, the corporation deducts the premiums and reports them as wages on the owner’s W-2, subject to income tax withholding (IRS, S corporation compensation). Those extra wages are not subject to Social Security, Medicare or FUTA taxes when paid under a plan for employees (IRS, S corporation compensation). The shareholder can then take an above-the-line deduction for them (IRS, S corporation compensation).

An owner’s home office or car is handled through the corporation, not on the owner’s own Schedule C. An accountable plan is a written reimbursement policy under which the owner accounts for expenses with receipts and returns any excess payment (IRS Publication 463 (2025)). Ask for the plan, the expense reports, the mileage logs and the payment records.

Each shareholder needs the Schedule K-1 and the W-2 from the corporation. They also need a running basis figure. Stock basis is what the shareholder has in the stock: what they paid or put in, plus income passed through, minus losses and distributions.

Shareholders use Form 7203 to figure the limits on deductions and losses that pass through from the corporation (IRS, About Form 7203). It must be filed by a shareholder who claims a loss, receives a non-dividend distribution, disposes of stock or gets a loan repaid by the corporation (Form 7203 instructions). Keep last year’s Form 7203 or basis worksheet, plus records of any money the shareholder put in or lent to the company.

Distributions need a date and amount for each shareholder. The Schedule K-1 guide explains what each line of the form shows.

A few items come up every year. If the corporation has foreign activity or foreign shareholders, the preparer may need Schedules K-2 and K-3; a corporation that meets the domestic filing exception must notify shareholders instead (Form 1120-S instructions (2025)). Ask early whether any of that applies.

Others are routine: loan papers for money moved between the owner and the company, state annual reports and franchise tax, fixed asset invoices and inventory counts. Mixed money causes the most rework. When the owner pays a personal bill from the company account, the preparer has to sort out whether it was pay, a loan, a distribution or a reimbursement. Ask the owner to flag those charges on the statements before sending them.

• Personal bills paid by the company: flag as a distribution or owner pay.
• Company bills paid personally: support with a receipt and an expense report.
• Money the owner put in during the year: say whether it was a loan or capital.

• IRS, S corporations: S corporations elect to pass corporate income, losses, deductions and credits through to their shareholders.
• IRS, About Form 1120-S: Form 1120-S reports the income, deductions and credits of an S corporation.
• Form 1120-S instructions (2025): Due the 15th day of the 3rd month (March 16, 2026 for calendar 2025), $255 per shareholder per month for late returns, Form 1125-E at $500,000 of receipts, and Schedules K-2 and K-3.
• IRS Rev. Proc. 2025-32: For an S corporation return required to be filed in 2027, the section 6699(b)(1) penalty amount is $260.
• IRS, S corporation compensation: Reasonable compensation before distributions, reclassification as wages, the W-2 treatment of health premiums for 2-percent shareholders, and the shareholder’s above-the-line deduction.
• IRS, About Form 7203: Shareholders use Form 7203 to figure limits on their share of S corporation deductions, credits and other items.
• Form 7203 instructions: Form 7203 is filed by shareholders who claim a loss, receive a non-dividend distribution, dispose of stock or receive a loan repayment.
• IRS Publication 463 (2025): Under an accountable plan, the employee accounts for expenses and returns any excess reimbursement.
• Forms 1099-MISC and 1099-NEC instructions (rev. 12/2026): For tax years beginning after 2025, the Form 1099-NEC threshold is $2,000.
• Forms 1099-MISC and 1099-NEC instructions, 2025: For 2025, Form 1099-NEC reported payments of $600 or more.