1120-s
Business Tax Forms, Form 1120-S

Draft 2025 Schedule K-1 (Form 1120-S): What Shareholders Need to Know

Note: The draft you are looking at is not for filing. The IRS provides early release drafts of tax forms and instructions only for informational purposes. These drafts may be updated if legislation changes or unexpected issues arise, so they should never be filed. Final versions are always published on the IRS Latest Forms page. 

What Is Schedule K-1 (Form 1120-S)? 

Schedule K-1 (Form 1120-S) is the IRS form used by S corporations to report each shareholder’s share of the corporation’s income, deductions, credits, and other tax items. Since S corporations are pass-through entities, they don’t pay income taxes at the corporate level. Instead, income and losses are passed through to shareholders, who then report the information on their individual tax returns. 

For the 2025 tax year, the IRS has released a draft version of Schedule K-1. While it looks very similar to prior years, it’s important for shareholders and tax professionals to understand its structure and updates before the final form is issued. 

Why the IRS Releases Draft Forms 

The IRS releases draft forms to give taxpayers and tax professionals an early look at potential changes for the upcoming filing season. While the 2025 Draft Schedule K-1 closely resembles prior versions, the early release allows stakeholders to: 

  • Prepare for upcoming tax season 
  • Review reporting requirements 

Remember: Draft forms should never be filed. Only the final, OMB-approved versions are valid for tax reporting. 

Key Sections in the 2025 Draft Schedule K-1 

The draft Schedule K-1 (Form 1120-S) for tax year 2025 retains its familiar three-part structure: 

Part I: Information About the Corporation 

This section identifies the S corporation filing the return, including: 

  • Employer Identification Number (EIN) 
  • Name and address of the corporation 
  • IRS Center where the return was filed 
  • Number of shares at the beginning and end of the tax year 

Part II: Information About the Shareholder 

This section provides details about the shareholder, such as: 

  • Shareholder’s identifying number 
  • Name and address 
  • Type of entity (individual, trust, estate, disregarded entity, etc.) 
  • Ownership percentage for the current year 
  • Number of shares at the beginning and end of the year 
  • Loans from shareholder to the corporation 

Part III: Shareholder’s Share of Current Year Income, Deductions, Credits, and Other Items 

This is the heart of Schedule K-1, where the shareholder’s portion of the S corporation’s tax attributes is reported. Items include: 

  • Ordinary business income or loss 
  • Rental income or loss 
  • Dividend income (ordinary and qualified) 
  • Interest income, royalties, and capital gains/losses 
  • Section 179 deduction and other deductions 
  • Credits and AMT (alternative minimum tax) items 
  • Items affecting shareholder basis 
  • Other specific information for at-risk and passive activity purposes 

Additional checkboxes notify if multiple at-risk or passive activity categories are present, and whether a Schedule K-3 (international tax items) is attached. 

How Shareholders Use Schedule K-1 

Shareholders incorporate the information reported on Schedule K-1 into their own tax filings, primarily on Form 1040 (U.S. Individual Income Tax Return). The K-1 determines: 

  • How much taxable income or deductible loss must be added to the shareholder’s personal return. 
  • The effect of basis adjustments on future gain or loss recognition. 
  • Eligibility for specific tax deductions and credits linked to activity reported by the S corporation. 

Important Reminders 

  • Do not file draft forms. The 2025 draft is informational and may change before the final version is approved. 
  • Stay updated. The final Schedule K-1 (Form 1120-S) will be available at IRS.gov/Form1120S once released. 
  • Check ownership accuracy. Shareholders and tax professionals should verify that ownership percentages, number of shares, and basis calculations are applied correctly when preparing returns. 

Final Thoughts 

The 2025 Draft Schedule K-1 (Form 1120-S) continues to serve its essential role in reporting each shareholder’s portion of an S corporation’s financial activity. While this draft provides a preview, shareholders should rely only on the final IRS-approved form when filing taxes. 

If you are a shareholder in an S corporation, reviewing your K-1 carefully is critical to ensure your personal return reflects the correct amounts. Always consult with a qualified tax professional if you’re unsure about how to report the information. 

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