What’s New

Increase in penalty for failure to file. For tax returns required to be filed in 2026, the minimum penalty for failure to file a return that is more than 60 days late has increased to the smaller of the tax due or $525. See Late filing of return , later.

Electronic payments. If the corporation has access to U.S. banking services or electronic payment systems, it should use direct deposit for any refunds and pay electronically for any payments, whenever possible.

Direct deposit. Direct deposit fields have been added onto the form on lines 28c, 28d, and 28e. If there is an overpayment on line 27, enter the amount the corporation wants refunded on line 28b and complete the direct deposit information on lines 28c, 28d, and 28e. Instead of a direct deposit of the corporation’s refund, it can still choose to have all or part of the overpayment credited to next year’s estimated tax by completing line 28a. See Line 27. Overpayment, later, for more information.

Making a payment. If there is a balance due on line 26, go to IRS.gov/Payments for information on how to make a payment. See Tax Payments and Line 26. Amount Owed, later, for more details.

Due date of a section 336(e) election. An S corporation making a section 336(e) election generally must file Form 1120-S (with the section 336(e) election statement attached) for its tax year ending on the date of the qualified stock disposition by the 15th day of the 3rd month after the date of the qualified stock disposition. See When To File , later.

Domestic research or experimental expenditures. P.L. 119-21, commonly known as the One Big Beautiful Bill Act (OBBBA), adds new section 174A to the Internal Revenue Code. Section 174A(a) allows taxpayers to deduct amounts paid or incurred for domestic research and experimental expenditures in tax years beginning after 2024. Alternatively, under section 174A(c), a taxpayer may elect to charge such expenditures to a capital account and amortize such expenditures ratably over a period of not less than 60 months, beginning with the month in which the taxpayer first realizes benefits from such expenditures. In addition, section 70302(f) of P.L. 119-21 provides taxpayers with various transition options that may be applied to recover unamortized amounts paid or incurred in tax years beginning after 2021, and before 2025, that were capitalized and amortized for such tax years. See Revenue Procedure 2025-28 for information regarding the transition options contained in section 70302(f) of P.L. 119-21, as well as the procedures to follow to begin applying either section 174A(a) or (c) for the corporation's first tax year beginning after 2024.

Certain qualified sound recording productions. P.L. 119-21 amends section 181 to include qualified sound recording

production costs as an elective expense deduction. An S corporation can elect to deduct certain costs of qualified sound recording productions that commence in a tax year ending after July 4, 2025, and commence before January 1, 2026. Also, qualified sound recording productions are eligible for the special depreciation allowance under section 168(k) if they commence in tax years ending after July 4, 2025. Qualified sound recording productions acquired after January 19, 2025, are eligible for 100% special allowance depreciation under the amendments to section 168(k) by P.L. 119-21. Qualified sound recording productions acquired before January 20, 2025, and commence in tax years ending after July 4, 2025, are also eligible for the special depreciation allowance at the applicable phased down percentage rates under section 168(k)(6) as in effect prior to amendment by P.L. 119-21. See sections 181 and 168(k).

Gain from the sale or exchange of qualified farmland prop- erty to qualified farmers. P.L. 119-21 added section 1062, Gain from the sale or exchange of qualified farmland property to qualified farmers. For tax years beginning after July 4, 2025, an S corporation must complete a separate Schedule A (Form 1062) for each sale or exchange of qualified farmland property to qualified farmers as defined under section 1062 and attach the form(s) to Form 1120-S and provide shareholders with a copy of the covenant and information regarding the gain on the sale or exchange of qualified property. See Other information (code ZZ), later.

Interest on loans secured by rural or agricultural real prop- erty. P.L. 119-21 enacted new section 139L. For tax years ending after July 4, 2025, section 139L allows a partial exclusion from the gross income of interest received by qualified lenders on loans secured by rural or agricultural real property. For more information, see section 139L and Other information (code ZZ) , later.

Schedules K and K-1 reporting codes. The following new reporting codes are added to line 17d.

• Code BA. Domestic research or experimental expenditures.

• Code ZZ. Gain from the sale or exchange of qualified farmland property to qualified farmers.

• Code ZZ. Interest on loans secured by rural or agricultural real property.