Two returns with nearly the same name can mean very different tax outcomes. The letter 'S' on the end of Form 1120-S marks a pass-through entity. Form 1120 is the corporate income tax return. Understanding the difference is the starting point for choosing, and for spotting when you are filing the wrong one.
The short answer
- Form 1120: filed by a C corporation, which is a separate taxpayer for federal income tax.
- Form 1120-S: filed by a corporation or LLC with a valid election to be an S corporation.
- Neither: sole proprietors and default single-member LLCs file on Form 1040, and default multi-member LLCs file Form 1065.
How a C corporation is taxed
According to the IRS, a C corporation is recognized as a separate taxpaying entity for federal income tax purposes. Profits face double taxation: the corporation is taxed when it earns them, and shareholders are taxed again when profits are paid out as dividends. The corporation cannot deduct dividends, and shareholders cannot deduct corporate losses. A corporation generally takes the same deductions as a sole proprietorship, and may claim special deductions as well. Income tax is reported on Form 1120.
How an S corporation is taxed
An S corporation generally does not pay federal income tax at the entity level. It files Form 1120-S to report its income, gains, losses, deductions, and credits, and passes them to shareholders on Schedule K-1. Shareholders report their shares on their own returns and pay tax whether or not they receive distributions. Working owners must be paid reasonable wages through payroll. See S-corp reasonable salary.
Side-by-side differences
- Entity-level tax: yes for a C corporation, generally no for an S corporation.
- Owner reporting: dividends and wages for a C corporation; K-1 pass-through for an S corporation.
- Ownership limits: none for a C corporation; an S corporation is limited to eligible shareholders and one class of stock.
- Filing complexity: Form 1120 includes entity-level tax computations; Form 1120-S includes shareholder allocation and basis items.
- Losses: pass through to shareholders in an S corporation, subject to basis limits; stay in the entity in a C corporation.
Filing deadlines
The two returns have different due dates. A calendar-year S corporation return is generally due on the 15th day of the third month after year-end, while a C corporation return is generally due a month later, with extensions available through Form 7004, which the IRS describes as providing an automatic 6-month extension of time to file. Extensions do not extend the time to pay. Confirm exact current-year dates in the IRS instructions, since rules for fiscal-year entities differ.
Which one should you be filing?
- 1Check how the entity was formed and whether it filed Form 2553 or Form 8832 and when.
- 2If it is a corporation with no S election, it is a C corporation and files Form 1120.
- 3If an LLC elected corporate treatment but not S status, it files Form 1120.
- 4If an S election was filed, confirm it was accepted and valid. See late S-corp election relief.
- 5Review prior returns for consistency. Filing the wrong form can create penalties and mismatches.
When a C corporation makes sense
- You plan to raise outside investment, including from entities that cannot own S stock.
- You want multiple stock classes.
- You intend to retain profits in the business.
- You qualify for specific corporate-level tax treatment that fits your plans.
When an S corporation makes sense
Owner-operated businesses with steady profit often prefer S status to reduce self-employment tax. The trade-offs are payroll, a separate return, and eligibility rules. See LLC taxed as S corp and LLC vs S corp for the analysis. For the filing detail, see S-corp tax return filing.
E-filing note
The IRS says C corporations filing 10 or more returns in a calendar year must e-file Forms 1120 for returns due on or after January 1, 2024. Many other entities e-file by choice or by preparer practice.
The right entity classification depends on profit, owners, growth plans, and state taxes. A projection comparing both structures is worth more than any rule of thumb.
Our tax planning service models both structures for your numbers. To schedule a business tax planning consultation, tell us your entity type, profit level, and growth plans.
