Form 1120 vs 1120-S: Which Corporate Return You File

Form 1120 is the income tax return for C corporations, which pay a flat 21% federal tax themselves; Form 1120-S is the return for S corporations, which generally pay no federal income tax and pass profit through to shareholders on Schedule K-1. Which one you file depends on whether your corporation or LLC has a valid S election, not on the company's size or name. This guide compares Form 1120 vs 1120-S on eligibility, tax, deadlines and penalties, with a worked example.

This is general information, not tax advice. Entity choice has long-term consequences, so review yours with a CPA.

Form 1120 vs 1120-S at a glance

	Form 1120 (C corporation)	Form 1120-S (S corporation)
Who files	Corporations and LLCs taxed as corporations without an S election	Corporations and LLCs with a valid Form 2553 election
Federal income tax	Flat 21% paid by the corporation	Generally none at entity level; owners pay on their share
Owner tax on profit	Again when paid as dividends (double taxation)	Once, on personal return, whether or not distributed
Owner forms	W-2 for salary, 1099-DIV for dividends	W-2 for salary, Schedule K-1 for share of profit
Calendar-year due date (2026 return)	April 15, 2027	March 15, 2027
Extended due date (Form 7004)	October 15, 2027	September 15, 2027
Shareholder limits	None	Up to 100 shareholders, generally US individuals, one class of stock
QBI deduction for owners	Not available	Available on qualifying pass-through income
Retained earnings	Taxed at 21%	Taxed to owners at personal rates

Our broader comparison of S corp vs C corp covers non-tax differences such as fundraising and stock options.

Who files Form 1120

Every domestic corporation files Form 1120 unless it qualifies for and elects another return. That includes:

• Corporations formed under state law that never filed Form 2553.
• LLCs that filed Form 8832 to be taxed as a corporation, without an S election.
• Former S corporations whose election terminated, for example because they issued a second class of stock or took on an ineligible shareholder.

The C corporation calculates taxable income on Form 1120 and pays 21% on it. If it pays dividends, shareholders pay qualified dividend rates (generally 0%, 15% or 20%) plus the 3.8% net investment income tax where it applies. Corporations that expect to owe $500 or more must also make quarterly estimated payments.

Who files Form 1120-S

To file Form 1120-S, the business must be a domestic corporation or LLC with a valid S election and meet these rules:

• No more than 100 shareholders (family members can be treated as one).
• Shareholders are generally US citizens or residents, certain trusts and estates; no partnerships, corporations or nonresident aliens.
• Only one class of stock (differences in voting rights are allowed).
• Not an ineligible corporation, such as certain banks and insurance companies.

The election is made on Form 2553, generally no more than two months and 15 days after the start of the tax year it is to take effect. Our guide to Form 2553 and the S corp election walks through it, and the new guide to late S corp election relief covers what to do if you missed the deadline.

How the tax works on each return

Form 1120: two layers

Profit is taxed at 21% inside the corporation. Whatever is paid out as dividends is taxed again to the shareholder. Salary paid to owner-employees is deductible by the corporation, so it is taxed once, but it carries payroll taxes.

Form 1120-S: one layer

The S corporation reports income and deductions on Form 1120-S, then allocates each shareholder's share on Schedule K-1. Shareholders pay income tax on that share at their own rates, with the potential benefit of the 20% QBI deduction. Profit passed through on the K-1 is not subject to self-employment tax, but owners who work in the business must take a reasonable salary through payroll.

Worked example: $200,000 of profit, two ways

Jordan owns a consulting company that earns $200,000 before paying Jordan. In both cases Jordan takes a $90,000 salary and takes the rest out of the business. Jordan is single with no other income. Figures are approximate and illustrative, using 2026 federal rates and ignoring state tax.

Step	C corporation (Form 1120)	S corporation (Form 1120-S)
Profit before owner pay	$200,000	$200,000
Salary plus employer payroll taxes	$96,885	$96,885
Remaining profit	$103,115	$103,115
Entity income tax	21% = about $21,650	$0
Paid to Jordan beyond salary	Dividend of about $81,450	Distribution of $103,115 (taxed via K-1)
Jordan's personal income tax	About $23,000 (wages plus dividends at 15%)	About $30,000 (wages plus K-1 income, after QBI deduction)
Total payroll taxes (both halves)	About $13,770	About $13,770
Total federal tax	About $58,600	About $43,800

In this example the S corporation saves around $14,800 a year because profit is taxed once and, assuming Jordan qualifies for the full QBI deduction, a fifth of the K-1 income is deducted. The C corporation looks better only if Jordan leaves most profit inside the company for years, plans a sale that qualifies for the Section 1202 exclusion, or needs investors that an S corp cannot accept.

What each return reports

The two returns look similar on page one. Both report gross receipts, cost of goods sold, officer compensation, salaries, rent, taxes, interest, depreciation and other deductions. The differences show up after that:

• Form 1120 calculates taxable income, applies special deductions such as the dividends-received deduction, computes tax at 21%, and reconciles estimated payments and credits. Schedule M-1 or M-3 reconciles book income to taxable income, and Schedule L shows the balance sheet.
• Form 1120-S calculates ordinary business income, then lists separately stated items on Schedule K (such as charitable contributions, Section 179 and capital gains) that pass through to shareholders on their K-1s. It also tracks the accumulated adjustments account, which matters for how distributions are taxed.

Both returns include a balance sheet in many cases, so your books need to be in good shape: bank accounts reconciled, receivables and payables recorded, and owner draws separated from expenses. Our month-end close checklist keeps that work manageable through the year.

Switching between C and S status

Businesses do change status. A C corporation can elect S status with Form 2553 if it meets the eligibility rules, but it may then owe built-in gains tax on appreciated assets sold within five years, and any old C corporation earnings can create tax on excess passive income or taxable dividends later. An S corporation can revoke its election with the consent of shareholders holding more than half the shares, or lose it by breaking an eligibility rule; after a termination it generally cannot re-elect S status for five years without IRS consent. Because of these traps, plan a switch with an adviser, ideally effective at the start of a tax year so the business does not need to split the year between two returns.

Deadlines and late-filing penalties

For calendar-year businesses, the 2026 Form 1120-S is due March 15, 2027 and the 2026 Form 1120 is due April 15, 2027. Both can be extended six months with Form 7004, but a C corporation's extension does not extend the time to pay. You can confirm these dates in IRS Publication 509, Tax Calendars and our 2027 business tax deadlines list.

• Form 1120-S late: for 2025 returns, $255 per shareholder per month or part month, up to 12 months, even if no tax is due, according to the Form 1120-S instructions. The amount is adjusted for inflation each year.
• Form 1120 late: 5% of unpaid tax per month, up to 25%, with a minimum penalty for returns more than 60 days late, plus late-payment penalties and interest.

See our guide to business tax extensions for how Form 7004 works.

Step by step: confirming which return to file

1. Check your formation documents. Corporation or LLC?
2. Look for IRS election letters. A CP261 notice confirms an accepted S election; an acceptance letter for Form 8832 confirms corporate classification.
3. If you are an LLC with no election: you file Schedule C (single member) or Form 1065 (multi-member), not either corporate return. See how to file taxes as an LLC.
4. If you are a corporation with an S election: file Form 1120-S and issue K-1s.
5. Otherwise: file Form 1120.
6. Check eligibility each year. A new shareholder, trust or class of stock can end an S election without you noticing.

Common mistakes

• Assuming an LLC files Form 1120-S automatically. It needs an accepted Form 2553.
• Skipping owner salary in an S corp. Taking only distributions invites IRS reclassification.
• Paying personal expenses from the corporation. In a C corp these can become constructive dividends; in either type they muddy the books.
• Invoicing clients in the owner's name. Income belongs on the corporate return only if the corporation is the one billing. Use the company's legal name and EIN on invoices; our guide to the tax ID on invoices explains what to show.
• Ignoring state rules. Some states do not recognize S status fully or charge minimum franchise taxes, so check your state's treatment before electing.

Whichever return your company files, it starts with revenue you can document. Create invoices in your corporation's name with our free invoice generator: no sign-up, and every invoice downloads as a clean PDF for your records.