Unlike other corporations, an S Corporation's income, losses, and other items of income and deductions are passed through the corporation to its shareholders who report the income or losses on their own individual tax returns.

Form 1120-S is a United States Internal Revenue Service's tax form used by domestic U.S. corporation for filing a corporation's annual Income Tax Return related to its S Corporation status. This form is also known as the "U.S. Income Tax Return for an S Corporation."

The main purpose of the Form 1120-S is to report the income, losses, and dividends of the each shareholder who owns stock in the S Corporation. The form serves as a business's annual tax return as long as the S Corporation's status remains unchanged. The form contains the applicable numbers of shares and capital shares, information on corporate income, the number of shareholders and the amount of pass-through income or losses the shareholders are responsible for.

By claiming the S corporation status, corporations with a few shareholders can avoid double taxation of their earnings on the business, while still being eligible for all of the other regular corporate benefits. A major benefit of an S Corporation is that any income, loss, deductions, and credits are passed through the business and reported on the shareholder's personal tax return. This avoids any double taxation of a corporation and its shareholders.

In order to fill out the Form 1120-S, the business must have previously obtained an Internal Revenue Service Employer Identification Number (EIN) and verified with the IRS that they qualify for the S corporation status. The form must be completed by the last day of the tax year and then filed along with the company’s other tax documents.

If an S corporation's status changes during the filing year due to an ownership change or new incorporation, a partial Form 1120-S must be filed in order to comply and keep with the IRS filing requirements. Once all documents are filed, the IRS will review the form and then assess any applicable taxes and/or penalties that may be due.

In conclusion, Form 1120-S is an important tax form especially to S Corporation shareholders because it allows them to avoid double taxation, which ultimately helps a business save money. All S Corporations are required to complete and file a Form 1120-S annual tax return with the IRS in order to keep their S Corporation status.