Every year people and entities in the United States must submit various forms to the US Internal Revenue Service (or IRS), so their taxes can be counted correctly and all the required sums can be extracted from the taxpayers. Some templates require a little information and do not take long to fill out; other forms are long, contain numerous schedules, and turn into a time-consuming procedure.
However, the submission and tax payment are unavoidable, and everybody has to obey the Service’s rules. So, if you represent the S-corporation or own it, you might know about Form 1120-S and its Schedules, including K-1.
This document is used to define the shareowner’s incomes and losses from the entity. It contains three blocks: the first for the corporation info, the second for the member’s data, and the third for the detailed description of business activity results (in numbers and US dollars).
Remember that this schedule should bother you only if you are a member or a representative of the “S” type corporation. Other entities are also required to create K-1, but the forms and the schedules are different. Be careful when choosing the template to fill out.
Even though Schedule K-1 is dedicated to shareowners (each one personally), they shall not complete the template: the corporation does it for each person (or entity). Shareowners then either keep the paper in their personal archives or add information from the paper to their tax returns.
Because the form creation is an entity’s responsibility, there is normally an accountant who makes and submits both Form 1120-S and all the needed schedules. If for some reason, you cannot ask an accountant to create the papers, you can either try to do it by yourself or hire someone who deals with such forms professionally on a daily basis.
Although we always recommend delegating this process, circumstances you face may force you to complete the template by yourself; that is why we give you a set of guidelines below. They are quite general, so you still have to consult professionals if there is something that bothers you or something you do not understand.
Download the Template
Nowadays, getting the majority of legal templates is easy: you do not have to go anywhere and take the actual paper; downloading it from the governmental institutions or company’s official website is sufficient.
Moreover, sometimes you can find it on sites made specifically for forms’ generating and downloading: for instance, you can get the Schedule K-1 here using our advanced form-building software. It is even easier than visiting other sites and looking for the template there.
Determine the Considered Year (or Tax Year)
You should start with defining the year for which this document is being made. Insert the beginning and the ending of your entity’s tax year below the form’s heading.
Indicate the Corporation
You have to describe the entity for which this form is made in the first part. Write the employer identification number (EIN), name, and full address with a postal code. Then, indicate in which Center of the IRS the corporation has submitted its tax return previously.
Introduce the Shareowner
The next block is for the shareowner’s info. Insert their ID: it can be the above-mentioned EIN, social security number, or individual taxpayer identification number. Then, line by line, add the allocations in percent for the considered year, a number of shares, and loans at the start and end of the year.
Leave the field below blank because it will be used by the Service’s workers to make their notes and records.
Describe the Shareowner’s Share in Detail
The form’s third part is included so you can describe in detail what share belongs to this specific owner in terms of the entity’s income, credits, deductions, and so on.
Complete this part by filling in the required data: ordinary income (or loss), net rental estate income (or loss), interest income, royalties, dividends, capital gain (or loss), foreign transactions, credits, and other elements.
Below the chart, read the two options regarding the owner’s business activities and mark the relevant option.
The document must be submitted to the Service by the corporation that creates it and issues it to shareowners. Shareowners should then attach the form to their tax returns and file all the papers together.
When sent to the owner, the document should be thoroughly checked. If the owner receives the form from the entity and finds any mistake there, the document must be corrected and re-issued.
Corporations can file the document by regular mail (see the address on the IRS website) or via the Service’s website specifically developed for such purposes. The form should go along with Form 1120-S.
Every shareowner has to get the form from the entity no later than the middle of the tax year’s third month. If an entity works in accordance with a calendar year, it will be March 15, the same day when entities must finish filing their 1120-S forms to the Service.
It is advised to send all your documents digitally, not in paper form, because this makes the processing quicker.