Key takeaways
- Price a Form 1120-S by hours per component, not as one flat fee for the form.
- Attach Form 4562 when any one of four conditions applies, not only when new property was bought this year.
- Each shareholder multiplies the late-filing penalty: $255 per month or part of a month, up to 12 months.
- Ask for the closed trial balance and the payroll register before you quote, because a Schedule L that does not tie is what moves a return from Tier 2 to Tier 3.
- Quote each state return as a separate line, and do not bundle it into the federal fee.
What the federal return requires
The core of a calendar-year Form 1120-S is the front page, Schedule K, one Schedule K-1 for each shareholder, Schedule L (Balance Sheets per Books), Schedule M-1 and Schedule M-2. A basic return with one shareholder, no fixed-asset additions and no officer compensation issues is the floor for the work. Schedule L does not have to be completed if the corporation answered Yes to question 11 on Schedule B, and the same exemption applies to Schedule M-1.
Two other forms are conditional. Form 1125-A, Cost of Goods Sold, is attached if applicable, so a service company with no inventory skips it. Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, appears in the instructions' attachment order and applies when the company reports rental real estate activity.
Form 1125-E, Compensation of Officers, is required when total receipts are $500,000 or more. Read that threshold, the cost of goods line and the fixed-asset additions off the client file before you quote.
When Form 4562 applies
The line 14 instruction on Form 1120-S says to complete and attach Form 4562 only if the corporation placed property in service during the tax year. That is one trigger, not the full list. The Form 4562 instructions also require the form for depreciation on any vehicle or other listed property regardless of when it was placed in service, for amortization that begins during the tax year, and for a section 179 expense deduction that may include a carryover from a previous year.
Attach Form 4562 when any one of those four conditions applies. A company with none of them can report depreciation on prior-year assets directly on the return, but it still needs a fixed-asset depreciation schedule in the workpapers.
Decision rule: if the client still depreciates a vehicle bought in an earlier year, Form 4562 is required this year even though nothing was bought in 2026. Ask for the fixed-asset register with the original placed-in-service date and a flag for listed property on every vehicle, and price the form as its own line.
Price the return in four tiers
Price each tier by estimated hours at your blended rate, then add the state lines. The hour figures are planning assumptions for a senior preparer with a reviewer, not published benchmarks.
Tier 1 is a basic return: one or two shareholders, a Schedule L that ties to the closed books or is not required, no Form 1125-E, no Form 4562 and one state. Most of the hours go to the tie-out and the Schedule K-1 preparation.
Tier 2 is a return with three or more shareholders, or with any of these items: a shareholder loan, a basis question, a mid-year share transfer, or a shareholder who works in the business and needs a reasonable compensation check. Each shareholder adds a Schedule K-1 to check against the distributions and the ownership records. Plan roughly two to three times the Tier 1 hours once the count passes two.
Tier 3 is a return where the books do not tie to the return. The common causes are a year-end trial balance that was never closed, an accrual adjustment booked in the wrong year, or book-to-tax differences nobody tracked. The preparer does the reconciliation, so quote this tier only after you have seen the trial balance.
Tier 4 is any multistate return. Each state with nexus or income has its own return, its own filing rules and its own fee or minimum tax. Pull each state's current figures from the state revenue site and quote them as separate lines.
Price the reasonable compensation check
The IRS guidance on officer pay says that Subchapter S corporations should treat payments for services to officers as wages, not as distributions of cash and property or loans to shareholders. A shareholder who works in the business and takes only distributions creates a payroll question before the return is prepared.
Decision rule: if a shareholder-employee took distributions and no W-2 wages, ask for the W-2s and the payroll register for the year before you quote. If there are no W-2s, quote a separate block of hours for a compensation memo, and tell the client in writing that the wage figure on the return is a judgment the client has to own.
Write the memo into the client file, not the return, and price it as its own line.
Deadlines and penalty exposure
For calendar year corporations the regular due date is March 15. If that day falls on a Saturday, Sunday or legal holiday, the return can be filed on the next day that is not one. For tax year 2025, March 15, 2026 was a Sunday, so the due date was March 16, 2026. For tax year 2026, the due date is March 15, 2027, which is a Monday, so no shift applies.
Form 7004 requests an automatic 6-month extension of time to file. It extends the time to file, so do not describe it to a client as more time to pay tax. Quote it as the same engagement unless the client delays the books, and charge the rebuild separately if the books are late.
The late-filing penalty runs per shareholder. The Form 1120-S instructions state $255 for each month or part of a month, up to 12 months, multiplied by the number of shareholders. The instructions page I checked does not tie that $255 to a filing year, so confirm the amount in the instructions for the return year before you quote it. Three shareholders and two months late is six times $255.
For a tax return required to be filed in 2026 that is more than 60 days late, the instructions set the minimum penalty at the smaller of the tax due or $525. That applies to tax year 2025 returns, which were due in 2026. A client who brings the books in February after an extension has already passed should hear that number before you accept the engagement.
What raises the price
The items that add hours most often are a Schedule L that does not tie, shareholder loans or basis questions, a mid-year ownership change, a shareholder with no payroll records, multistate filings, Form 1125-E when receipts are $500,000 or more, and new fixed assets or vehicles that need a Form 4562 schedule. Each one should be a line in the quote.
The failure mode is the file dump. The client sends a bank export, a spreadsheet of receipts and an unclosed accounting file. The preparer rebuilds the trial balance, and those hours never appear in the original estimate. The fix is to make the closed trial balance a condition of the quote, and to quote the rebuild as its own engagement if the client cannot supply one.
How clean intake lowers the fee
Ask for five items before you quote: the year-end trial balance from a closed set of books, the general ledger detail for shareholder and officer accounts, the payroll register with each shareholder's W-2 wages, the prior year Schedule K-1 information, and the list of fixed asset additions with the date each asset was placed in service and a listed-property flag for each vehicle.
A request that works: “Please send the year-end trial balance from a closed set of books, dated the last day of the tax year, plus the payroll register for each shareholder who worked in the business, and the date each asset was placed in service, including every vehicle.” The request names the documents, so the client cannot send a general folder.
Decision rule: if the client has a closed trial balance, quote Tier 1 or Tier 2 from the file. If the client has only bank feeds or an unclosed file, quote the rebuild as a separate engagement and ask for the closing entries first.
Ask for the ownership percentages as of the year end in a one-line table, so the preparer does not infer them from the operating agreement.