South Carolina S corp tax return: SC1120S, withholding and extensions

What an S corporation files in South Carolina

The state return is the SC1120S, South Carolina's S Corporation Income Tax Return, and it includes Schedule D, the annual report. A company with nonresident shareholders also files the SC1120S-WH to pay their withholding. Confirm Form 2553 is on file before building either state return.

The SC1120S carries a license fee: 0.1% of capital stock and paid-in surplus plus $15, with a $25 minimum, due by the original due date of the return or of the extension request. Separately, the department's S corporation page tells corporations, not only S corporations, to file form CL-1 and pay a one-time $25 initial license fee within 60 days of doing business or using capital in South Carolina. For a client that started or moved operations into the state, check whether that was done. The SC DOR also sends an SC1070 registration letter to companies it identifies, so ask whether one arrived.

Due dates for tax year 2026

For a calendar-year company the SC1120S and the SC1120S-WH are both due March 15, 2027, a Monday, so no weekend shift applies.

The company must also give each nonresident shareholder a 1099-MISC with "South Carolina Only" written at the top, showing the amount withheld, by the 15th day of the third month after year-end, March 15, 2027 for a calendar-year company. The shareholder attaches it to their SC1040 to claim the credit; the SC1120S K-1 does not do that job.

Estimated tax: an S corporation must make estimated payments if its estimated tax (income tax less credits) is $100 or more, in installments due the 15th day of the fourth, sixth, ninth and twelfth months of the tax year. That is entity-level tax, separate from the nonresident withholding paid with the SC1120S-WH. Payments of $15,000 or more must be made electronically.

Extension rules and what they do not cover

The SC1120T requests an extension, but paying the balance due on MyDORWAY submits the request automatically. South Carolina also accepts a federal extension as a state extension if the return arrives within the time the IRS granted. Form 7004 generally gives 6 months, so for a calendar-year company the SC1120S would then be due 6 months after March 15, 2027. Keep the IRS acceptance in the file.

The extension covers filing only. There is no extension of time to pay, so an extended client still owes its estimated tax and the license fee by March 15, 2027.

The SC1120S-WH has no extension at all; the company must estimate the nonresident shareholders' South Carolina income and pay by the original date. A composite return has its own extension, the SC4868, not the SC1120T or Form 7004, and extending it does not extend the SC1120S. The failure mode is filing Form 7004 and assuming the withholding is covered; calendar the SC1120S-WH payment separately. Also, payments on the SC1120S-WH cannot be claimed as payments on the SC1120S, and an SC1120S overpayment cannot be moved to the SC1120S-WH. Missing the withholding return and payment by the due date results in late-file and late-pay penalties plus interest.

Nonresident withholding: rate, exceptions and the I-309

The company withholds 5% of each nonresident shareholder's share of South Carolina taxable income, whether or not the income is distributed. No SC1120S-WH is needed if the corporation has no South Carolina taxable income. Pay the withholding on MyDORWAY by selecting Business Income Tax Payment.

Withholding is not required for a shareholder who is included in a composite return, who has filed an I-309 affidavit, or who is tax-exempt under IRC 501(a). The I-309 is the nonresident's agreement to South Carolina's jurisdiction. It is attached to the SC1120S-WH, and if the owner already filed one, the department says not to resubmit it.

For each owner, record state of residence on December 31, 2026. A South Carolina resident gets no withholding. A nonresident gets one of three treatments: signed I-309, composite, or 5% withheld. A reasonable request is: "Please sign and return the enclosed I-309 by [your internal date]. Without it the company must withhold 5% of your South Carolina share for tax year 2026 and issue you a 1099-MISC." The internal date is your own scheduling choice, not a state rule.

The department's pages do not address a shareholder who changes residence during the year or joins after year-end. Document the residency facts and the date of the change in the file, and ask the department before filing rather than assuming no withholding.

Worked example: three owners, three treatments

Assume an S corporation with $300,000 of South Carolina taxable income for tax year 2026. Owner A lives in Greenville and owns 50%. Owner B lives in Georgia, owns 30% and filed an I-309 earlier. Owner C lives in North Carolina, owns 20% and has not signed anything.

Owner A has no withholding. Owner B's I-309 removes withholding on the 30% share. Owner C's 20% share is one fifth of the total, and 5% of it is $3,000. The company pays that with the SC1120S-WH and sends Owner C a 1099-MISC for the same amount marked "South Carolina Only". Without B's I-309, the company would withhold $4,500 more.

Composite returns

A composite return is a single return filed by a partnership, S corporation or LLC for nonresident participants. A shareholder included in it is not subject to withholding. Participants are limited to individuals, trusts or estates, and corporate partners and members may not participate.

Composite makes sense when several nonresidents would otherwise each file an SC1040 for a small amount. Before choosing, check whether any owner would give up deductions or credits.

The 3% active trade or business election

South Carolina taxes active trade or business income at 3% for owners who elect it, and since tax year 2021 a qualified entity, a partnership or S corporation whose owners are all qualified owners, can make the election for itself. Section 12-6-545 says the election is annual and must be made no later than the due date for filing the return. It is made at the S corporation level on behalf of all shareholders, on page 1 of the SC1120S, with I-435 calculating the tax and the SC1120S K-1 showing each share. Because it binds every shareholder, get all owners' written agreement first; the department does not require consent forms, so that is a practice recommendation.

On $300,000 of qualifying income, 3% is $9,000 at the entity level. Compare that to what the owners would owe personally in South Carolina. The department's forms page lists I-435 for tax years 2025 through 2021, with no 2026 version yet, so recheck it before filing.

What to collect from the client

Ask for the following by early February 2027: the shareholder list with state of residence on December 31, 2026, any change of residence or ownership during the year, and ownership percentages; copies of any I-309 already filed; the federal Form 1120-S figures and the state apportionment data, if the company operates outside South Carolina; the balance sheet for the license fee, showing capital stock and paid-in surplus; the prior-year SC1120S and estimated payment confirmations; and the SC1070 letter if one was received.

Penalties and where the federal return fits

The federal Form 1120-S comes first because the SC1120S starts from it. The state has its own penalties. The department's corporate FAQ says a late return may be penalized 5% of the unpaid tax for each month it is late, capped at 25%, and the late payment penalty is one-half of one percent of the tax plus one-half percent for each additional month, also capped at 25%. The federal late-filing penalty is a per-shareholder, per-month amount that changes yearly, so use the Form 1120-S instructions for returns due in 2027.

The department's pages state no penalty for failing to issue the 1099-MISC, but without it the nonresident cannot support the SC1040 credit.