Key takeaways
- An Alabama S corporation files Form 20S for income tax and Form PPT for business privilege tax. They are separate returns.
- The Form 20S for tax year 2026 is due March 15, 2027, which is a Monday, and the extension to file does not extend payment.
- The electing pass-through entity election is a box on the timely filed Form 20S and has to be made every year.
- An electing entity is exempt from the composite payment requirement, so decide on the election before you quote composite work.
- Ask for the shareholder residency list and last year's Form 20S in November, not in March.
The three Alabama filings for an S corporation
Alabama recognizes the federal S election, so the corporation files Form 20S with the Alabama Department of Revenue. The return needs an Alabama Schedule K-1 for each person or entity that was a shareholder at any time during the year, plus a complete copy of the federal Form 1120-S with every federal K-1, statement and attachment. A return without those pieces is the one that draws a letter.
The business privilege tax is a separate return. S corporations, limited liability entities and disregarded entities file Alabama Form PPT, and the department says it is due on the same date as the corresponding federal return. Treat PPT as its own line item in the engagement letter and on the tracker, because a client who thinks Form 20S covers everything will not send you the net worth figures PPT needs.
The third piece is optional or conditional: the electing pass-through entity tax, or the composite payment for nonresident owners. These are covered in the sections below. The department's instructions for Form 20S say not to attach Form PTE-C, Form EPT or their payments to the return, so those are filed on their own.
Due dates and extensions for tax year 2026
Form 20S is due on the 15th day of the third month after the tax year ends. For a calendar-year corporation filing for tax year 2026, that is March 15, 2027, which falls on a Monday, so no weekend roll applies. For tax year 2025, March 15, 2026 fell on a Sunday, so the due date moved to Monday, March 16, 2026. Fiscal-year clients move with their year end, and the department's instructions say a date that lands on a weekend or state holiday moves to the next business day.
Alabama recognizes federal extensions to file, but the department is explicit that an extension to file is not an extension to pay. Tax on the Form 20S is due on the original date.
Form PPT follows the federal due date and has an automatic extension to file, again with no extension of payment. Form BPT-IN, the initial business privilege return, is due within two and one-half months after the entity incorporates, with no extension. If you take on a client that formed this fall, calendar the BPT-IN first.
Penalties and payment rules to quote to clients
The Form 20S instructions set the late filing penalty at 10 percent of the tax due on Line 32 or $50, whichever is greater. The late payment penalty is 1 percent per month up to a maximum of 25 percent.
A corporation with Alabama income tax liability above $500 must pay estimated tax. If the amount due with the return is $750 or greater, payment must be made by electronic funds transfer. Tell the client up front, because a client who mails a check for $1,200 has not paid.
Worked example: a corporation shows $4,000 of tax on Line 32 and files on April 20 instead of March 15 with the balance unpaid. The late filing penalty is 10 percent, or $400, and the payment penalty starts at 1 percent per month on the $4,000.
Business privilege tax on Form PPT
For taxable years beginning after December 31, 2023, the department says there is a full exemption from the business privilege tax when the tax due is $100 or less, so a small S corporation may owe nothing and not need to file. Confirm the calculated amount before telling a client they are exempt, because the exemption depends on the computed tax, not on the size of the business.
Do not carry the old rule forward. Older instructions described a $100 minimum tax for every S corporation, and software defaults may still reflect it. Check the current Form PPT instructions for the computation and confirm the tax due is above or below $100 before deciding.
Ask the client for the year-end balance sheet, the date the entity registered in Alabama and any prior Form PPT or BPT-IN confirmation.
The electing pass-through entity tax
Alabama S corporations can elect to pay Alabama income tax at the entity level. The department's Schedule EPT-K1 applies 5 percent to the Alabama income allocated to each shareholder, and the owners receive a refundable credit for their share of the tax the entity paid. The entity files Form EPT in addition to Form 20S, and Schedule EPT-K1 must be attached or the Form EPT is incomplete.
The election is made on the Form 20S itself. Check the Electing PTE box on the timely filed return, including any extension. The box has to be checked every year the election is in effect, and the entity cannot amend after the extended due date to make or revoke the election. If neither the Electing box nor the Revoking box is checked, the return is treated as a Non-Electing PTE.
One wrinkle: Alabama Administrative Code 810-3-36-.01 says the election is made on Form PTE-E through My Alabama Taxes by the 15th day of the third month after year end, while the current Form 20S instructions describe the box on the return. Calendar both and confirm with the department if the election matters to a large number.
Electing entities must make estimated payments, and the instructions describe a 10 percent penalty for estimated payments not paid on time. That makes the election a fall planning decision, not a March checkbox.
Nonresident shareholders and composite returns
A non-electing S corporation with nonresident shareholders can use the composite route on Form PTE-C, the Nonresident Composite Payment Return. Alabama's regulation exempts an electing pass-through entity from the composite payment requirement in section 40-18-24.2, so the two paths do not stack.
The practical decision rule: if the entity elects, you do not file a composite for those owners. If it does not elect and has nonresident shareholders, find out whether each nonresident will file their own Alabama return or be included in the composite. Get that answer in writing, shareholder by shareholder.
In a tiered structure, the EPT instructions say that if an upper-tier LLC does not elect, the credit it receives must be reported on Form PTE-C, line 5c. A client that owns shares through an LLC needs that LLC's election status on your document list.
What to ask the client for
Send this in November: "For the Alabama S corporation return, please send last year's Form 20S, a list of every shareholder with their state of residence on December 31, and any shares transferred during 2026 with the date." Residency drives the composite and election decision, and a transfer date drives the Schedule K-1 allocation.
Add: "Please confirm whether the company elected to pay Alabama tax at the entity level last year, and send any Form EPT payment receipts for 2026." Without the payment record you cannot support the credit on a shareholder's return.
Tracking it in your document workflow
Give each Alabama S corporation client three status flags: election made or not, nonresident shareholders yes or no, and Form PPT exempt or not. A staff member preparing the return in March should not have to reread last year's file.
A request in Usual can hold the shareholder residency list as a repeatable section, with the prior-year return and payment receipts as upload fields and a not applicable option for entities with no nonresident owners.