In general, an S corporation does not pay tax on its income. Instead, the income, losses, deductions, and credits of the corporation are "passed through" to the shareholders.

S corporation return. An S corporation must file a return on Form 1120S, U.S. Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. In addition, the S corporation will send each shareholder a copy of the Shareholder’s Instructions for Schedule K-1 (Form 1120S) to help each shareholder report his or her share of the S corporation’s income, credits, and deductions.

Keep Schedule K-1 (Form 1120S) for your records. Do not attach it to your Form 1040.

For more information on S corporations and their shareholders, see the instructions for Form 1120S.

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