If Part II of the Schedule E shows an "S" in the area designated "Enter "P" for partnership; "S" for S corporation," the household is involved in an "S" Corporation. An "S" Corporation is a pass-thru small business. All income and expenses pass thru to the individual shareholders by their percentage of ownership. The following IRS documents will be needed in order to determine the countable "S" Corporation income:
* IRS Form 1120S - "U.S. Income Tax Return for an S Corporation" - four pages in length;
* Schedule K-1 (Form 1120S) - "Shareholder's Share of Income, Deductions, Credits, etc." - two pages in length;
* (As Appropriate) – If the "S" Corporation is involved in a farming operation, the corporation must file a Schedule F.
Each shareholder of an "S" Corporation should either have or be able to obtain a copy of the 1120S, their Schedule K-1, and other corporate schedules as appropriate.
(Rev. November 1, 1999)