How Much Does It Cost to File 1120S?

Filing Form 1120S is essential for S corporations to report income, deductions, and financial details to the IRS. While it ensures compliance with tax laws, the associated costs vary based on filing methods and professional assistance.

Several factors influence expenses, including digital filing fees, professional preparation charges, state-specific requirements, and late submission penalties. Understanding these costs helps business owners plan effectively and avoid unnecessary expenses.

Digital Filing Costs

Submitting Form 1120S electronically is efficient but comes with fees that depend on the chosen platform. The IRS does not charge for e-filing, but most businesses use third-party tax software, which has its own pricing. Platforms like TurboTax Business, TaxAct, and Drake Software charge between $50 and $200 for federal filing, depending on the return’s complexity and additional features like audit support.

Some providers bundle federal and state filings, while others charge separately. TaxSlayer Pro includes federal filing in its base package but requires an additional $40 to $50 per state return. Businesses operating in multiple states may see costs add up quickly. Premium versions with CPA assistance or advanced deduction optimization can push the total expense beyond $300.

Professional Preparation Fees

Hiring a tax professional increases costs but provides expertise that can maximize deductions and reduce errors. Fees vary based on return complexity, preparer experience, and additional services.

Certified Public Accountants (CPAs) and Enrolled Agents (EAs) typically charge between $800 and $2,500 for preparing Form 1120S. A simple return with minimal deductions and a single shareholder costs less, while a business with multiple shareholders and complex financial transactions pays more. Tax attorneys charge higher fees, particularly if tax planning or dispute resolution is involved.

Beyond the base fee, additional costs arise from bookkeeping services, amended returns, or audit representation. Many tax professionals offer bundled services, including quarterly tax planning and payroll tax filings, which can add thousands of dollars annually. Some firms charge hourly rates, typically between $150 and $400, for consultations or additional work.

State-Level Charges

State requirements add costs that vary by location. Some states impose corporate taxes, annual filing fees, or franchise taxes on S corporations. Fees may be flat or based on income, revenue, or shares issued.

California requires S corporations to pay a minimum $800 annual franchise tax, regardless of profitability. Texas and Tennessee impose gross receipts-based taxes, meaning businesses pay a percentage of total revenue. Tennessee’s excise tax is 6.5% of net earnings, while its franchise tax applies at 0.25% of net worth or tangible property.

New York imposes a fixed-dollar minimum tax based on gross receipts, with businesses earning over $1 million paying upwards of $1,500. Massachusetts requires S corporations with gross receipts exceeding $6 million to pay an 8% net income-based excise tax plus a property or net worth-based tax. Illinois levies a 1.5% personal property replacement tax on S corporations.

Some states also require separate entity-level tax returns, increasing compliance costs and administrative burdens.

Late Filing Penalties

Failing to submit Form 1120S on time results in significant penalties. The IRS charges $220 per shareholder per month, up to 12 months. A five-shareholder S corporation could face up to $13,200 in penalties for a year of noncompliance.

Late filing also delays Schedule K-1, which shareholders need for their personal tax filings. This can complicate their returns and increase audit risks. The IRS may waive penalties if reasonable cause is demonstrated, but repeated noncompliance can lead to stricter enforcement, including possible revocation of S corporation status and taxation as a C corporation.