How to File Your First S-Corp Tax Return

Step-by-step guide to filing Form 1120S for S-Corps, including deadlines, required schedules, and K-1 distribution.

1. Gather required financial documents. Collect your profit and loss statement, balance sheet, payroll records, and shareholder basis calculations. You'll need exact figures for revenue, deductible expenses, officer compensation, and any distributions made to shareholders during the tax year.
2. Complete Form 1120S basic information. Fill out pages 1-2 with your EIN, business address, and income statement data. Enter total income, deductions, and calculate ordinary business income. This flows to Schedule K, line 1.
3. Complete Schedule K for pass-through items. Report ordinary business income, rental income, interest, dividends, and any special deductions on Schedule K. Each line item here flows proportionally to individual shareholder K-1s based on ownership percentage.
4. Generate Schedule K-1s for each shareholder. Create individual K-1s showing each shareholder's pro-rata share of income, deductions, and credits. A 50% owner receives 50% of all pass-through items from Schedule K.
5. Reconcile shareholder basis and distributions. Calculate each shareholder's stock and debt basis. Distributions cannot exceed basis without triggering capital gains. Track beginning basis, add income items, subtract losses and distributions.
6. File by deadline and distribute K-1s. Submit Form 1120S by March 15th (or request 6-month extension). Provide K-1 copies to shareholders by the same deadline so they can file personal returns. Keep copies for your records.