Do S Corps Have K-1s? What Shareholders Should Know

Yes. Every S corporation must issue a Schedule K-1 (Form 1120-S) to each shareholder every year, reporting that person’s share of the company’s income, losses, deductions, and credits.¹ For the 2025 tax year filed in 2026, calendar-year S corporations must deliver those forms by March 16, 2026, because March 15 falls on a Sunday. If you own even one share of an S corp at any point during the year, a K-1 is coming, and the numbers on it drive your personal return.

Why the K-1 Exists

An S corporation itself generally pays no federal income tax. The company’s profits, losses, deductions, and credits pass through to the shareholders, who report those items on their personal returns.² The corporation files its own return on Form 1120-S showing the total picture, and each shareholder’s slice of that picture is documented on a K-1. One copy goes to the shareholder, another travels with the corporate return to the IRS.³ The IRS matches the two. If the figures you report don’t line up with the K-1 they already have, you’ll hear about it.

What the K-1 Reports

The form splits your share of the company’s activity into categories so each type of income or deduction gets the right tax treatment when it hits your 1040. The main items:

Ordinary business income or loss from day-to-day operations.
Rental real estate income or loss, reported separately because it usually falls under passive activity rules.
Interest and dividends earned by the corporation.
Capital gains and losses, split between short-term and long-term.
Royalties from intellectual property or natural resources.
Tax-exempt income, which isn’t taxed but still increases your ownership basis.
Nondeductible expenses, which you can’t write off but which reduce your basis.

Box 16D reports non-dividend distributions, meaning the cash or property the company actually sent you during the year.⁴ Box 17 handles less common items: investment income and expenses used for the net investment income tax calculation, recapture of certain credits, and depletion information for oil and gas properties.¹ Every category retains its character as it passes to you. A short-term capital gain at the corporate level is still a short-term gain on your return.

K-1 Income Is Not the Same as Cash

This is where S corporation shareholders most often get blindsided. The income on your K-1 and the cash you receive are two separate things, and they rarely match.

You owe tax on the income shown on your K-1 regardless of whether the company distributed anything to you.¹ If the S corporation earned $200,000 and you own half of it, you’re taxed on $100,000 of income even if every dollar stayed in the company’s bank account. Cash reinvested in inventory, equipment, or debt paydown is still your taxable income on paper.

Going the other direction, when the company does send you money, that distribution is generally tax-free up to your stock basis. Anything distributed above your basis is taxed as a capital gain, long-term if you’ve held the shares more than a year. Most S corporation distributions are non-dividend distributions and show up in Box 16D; actual dividend distributions are rare and would appear on Form 1099-DIV instead.⁴

One more point that separates S corp K-1 income from other pass-through income: it is not subject to self-employment tax.¹ Wages you draw as an employee of the S corporation are, of course, subject to normal payroll taxes, which the company withholds and remits.

Your Shareholder Basis Controls Everything

Basis is a running scorecard of your investment. It starts with what you paid for or contributed when you acquired your shares, goes up each year by your share of income and any additional contributions, and comes down through losses, deductions, and distributions. Two things depend on it: how much of a loss you can actually deduct, and whether your distributions stay tax-free.

The IRS requires shareholders to file Form 7203 to report stock and debt basis whenever they claim a loss from the S corporation, receive a non-dividend distribution, dispose of stock, or receive a loan repayment from the company.⁵ Even in years the form isn’t required, keeping a completed one in your file is worth the effort. Reconstructing basis several years later during an audit is expensive and sometimes impossible.

If your K-1 shows a loss that exceeds your combined stock and debt basis, you can only deduct up to your basis. The rest carries forward to future years when basis becomes available again.⁵ Basis is only the first gate. After it, at-risk rules, passive activity limits, and excess business loss rules can each shrink the deduction further.

Passive vs. Non-Passive Losses

If you don’t materially participate in the S corporation’s business, any loss on your K-1 is passive and can only offset other passive income. The IRS defines material participation through seven tests, but the ones people usually rely on are working more than 500 hours in the business during the year or performing substantially all of the work anyone did in the activity.⁶

Rental real estate income from an S corporation is almost always passive, even when you actively manage the property. The narrow exception is qualifying as a real estate professional, which requires more than 750 hours in real property businesses where you materially participate and that work representing more than half of your professional activity for the year.⁶ If you invested in an S corporation but don’t work in it, expect any losses to sit suspended until you have passive income to offset or you dispose of the whole interest.

When You’ll Get the K-1

Calendar-year S corporations must file Form 1120-S and deliver each shareholder’s K-1 by the 15th day of the third month after the tax year ends. For the 2025 tax year, that statutory date is March 15, 2026, which falls on a Sunday, pushing the actual deadline to Monday, March 16, 2026. That timing gives you roughly a month to fold the numbers into your personal return before April 15.

The corporation can file Form 7004 for an automatic six-month extension, moving the deadline to September 15, 2026. That extension applies only to the corporate return and K-1 delivery. It does not extend your personal filing deadline. If your K-1 hasn’t arrived by early April, you’ll likely need to file your own extension on Form 4868.

Putting the K-1 on Your Personal Return

K-1 income, losses, and deductions land on Schedule E (Form 1040), Part II, which handles pass-through entities. Each box on the K-1 has a specific home on your return, and the shareholder instructions walk through the mapping box by box. Capital gains and losses go to Schedule D, not Schedule E. Interest and dividend income flows to Schedule B.

S corporation shareholders may also be able to claim the qualified business income deduction of up to 20% of net K-1 income under Section 199A, which the One Big Beautiful Bill Act made permanent.⁷ Phase-outs apply at higher income levels, and specified service businesses like law, accounting, health care, and consulting face tighter limits.

Keep your K-1s and supporting records for at least three years after filing, and longer if basis tracking is in play.⁸

Plan for Estimated Taxes

Because K-1 income comes to you with no withholding attached, you’re generally on the hook for quarterly estimated tax payments. For 2026, estimated taxes are required if you expect to owe at least $1,000 after withholding and credits, and your withholding plus credits will cover less than the smaller of 90% of your 2026 tax or 100% of your 2025 tax. If your 2025 adjusted gross income exceeded $150,000 ($75,000 if married filing separately), the 100% safe harbor rises to 110%.⁹

Quarterly due dates for 2026 are April 15, June 15, September 15, and January 15, 2027. First-year S corporation shareholders in particular tend to underestimate what they’ll owe on pass-through income and take an underpayment penalty at filing time. If the business is your main income, work out your estimates with a tax preparer before the first quarterly deadline rather than after.

1
IRS.gov. 2025 Shareholder’s Instructions for Schedule K-1 (Form 1120-S)
2
Office of the Law Revision Counsel. 26 USC 1366 – Pass-Thru of Items to Shareholders
3
Internal Revenue Service. Instructions for Form 1120-S (2025)
4
Internal Revenue Service. S Corporation Stock and Debt Basis
5
IRS.gov. Instructions for Form 7203
6
Internal Revenue Service. Publication 925, Passive Activity and At-Risk Rules
7
Internal Revenue Service. Qualified Business Income Deduction
8
Internal Revenue Service. How Long Should I Keep Records
9
IRS.gov. 2026 Form 1040-ES